Policy Tailwinds Meet FX And AI Headwinds: Korea Market Outlook For Dec 22-26
The first slate of Public Growth Fund investments is out, signaling follow-through on the KOSDAQ activation push. That support meets two near-term risks: won-dollar volatility and a louder debate over AI overvaluation.
Set expectations accordingly. Policy can steady sentiment, but FX and AI news flow are still in the driver's seat this week.
Last Week's Tape: Sentiment Whiplash
The KOSPI opened at 4,167.16 on the 15th and finished at 4,020.55 on the 19th, down 3.5% for the week. KOSDAQ fell 2.4% over the same stretch.
Pressure built after reports on the 17th (local time) that Blue Owl Capital paused talks tied to a joint data center project with Oracle. AI growth doubts spread, and related names slipped. SK hynix fell 4.2% and Samsung Electronics dropped 2.4% last week.
Earnings Backdrop: Still Improving
Despite the AI sentiment hit, earnings momentum for major Korean corporates remains constructive. One house projects Samsung Electronics' Q4 operating profit at about 15.7 trillion won, up roughly 142% year over year.
Beyond semis, positive earnings revisions are evident across IT hardware, energy, shipbuilding, machinery, holding companies, and hotel/leisure. The fundamental picture does not look broken.
Policy Catalysts: Public Growth Fund And KOSDAQ Activation
The government named seven initial investment destinations expected to carry broad economic impact:
- Fostering "K-Nvidia"
- National AI Computing Center
- Offshore wind build-out in South Jeolla
- All-solid-state battery materials plant in Ulsan
- Energy-control semiconductor plant in North Chungcheong
- Foundry capacity in Pyeongtaek
- Energy infrastructure for the Yongin semiconductor cluster
The Public Growth Fund plans to support the venture ecosystem with 30 trillion won annually for five years, with at least 40% earmarked for regions. At a government briefing on the 19th, President Lee Jae-myung reinforced the intent to accelerate follow-through.
The KOSDAQ activation package drew feedback that concrete investment mechanics are still thin. Even so, expectations could rebuild as support programs roll out and tax incentives for the Public Growth Fund and KOSDAQ venture vehicles come into focus. One house pegs this week's KOSPI range at 3,850-4,200.
External Watch: U.S. GDP, BOJ, And FX
On the 23rd, the U.S. releases its third-quarter GDP update, with growth expected in the 3% range versus the prior quarter. For context and historical series, see the U.S. BEA's GDP resources here.
Last week, the Bank of Japan hiked its policy rate by 0.75 percentage points, the highest level since 1995, citing inflation above 2% and a weak yen. Some research desks view this as reducing uncertainty into year-end, improving odds for a "Santa rally." BOJ policy materials are available here.
That said, the yen did not firm as much as expected post-decision. With growth concerns still hanging over Japan, the risk of a rapid unwind in yen-funded trades looks lower, but a persistently soft yen continues to lean on the won-dollar rate. USD/KRW pushed above 1,480 on the 17th, an eight-month high.
Action Checklist For Desks And Policy Teams
- FX risk: Run stress tests at USD/KRW 1,500-1,520. Layer hedges via forwards and options instead of lump-sum trades; predefine trigger levels and size.
- AI exposure: Separate beneficiaries tied to compute, memory, and infra from story-driven names. Favor firms with near-term earnings visibility and capex discipline.
- Policy alignment: Map portfolios and pipelines to the seven focus areas above. Prepare co-investment and due diligence workflows for Public Growth Fund and KOSDAQ venture structures as tax guidance firms up.
- Liquidity and collateral: Recheck margin buffers for higher vol into year-end. Tighten stop-loss rules around AI beta and small-cap tech.
- Calendar: Track Dec 23 U.S. GDP and any follow-up from the FSC/FTC and line ministries on activation measures.
Base Case
Policy support provides a floor; FX and AI headlines cap the upside. Treat 3,850-4,200 as the working KOSPI band for the week, with quick moves on data and currency swings.
Stay nimble, keep hedges live, and position where policy and earnings overlap.
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