South Korea's stock market took a sharp dive today.
SK hynix and Samsung Electronics both fell over 7% intraday, while the KOSPI index at one point dropped more than 6%, triggering a circuit breaker. The sharp decline is being linked to a report from Shawn Kim, Morgan Stanley's Head of Asia and Europe Technology Research, who has been dubbed the "Grim Reaper of Korean Semiconductors."
On July 21, he published a report warning that the AI-driven semiconductor memory boom is nearing a turning point, forecasting that memory contract prices will peak in the fourth quarter. While some analysts argue that Kim's report was used to create panic rather than being the primary cause of the selloff, this time, his analysis has not only roiled the market but has also placed Morgan Stanley in an increasingly awkward position.
Morgan Stanley's standing in South Korea is becoming delicate. The Wall Street powerhouse has faced a series of setbacks in the Korean market due to its persistent bearish stance on the country's semiconductor sector. These setbacks range from being excluded from the lead underwriting list for SK hynix's US listing to a number of major deals falling through, placing significant reputational and commercial pressure on its Korean operations.
The most symbolic event is SK hynix's approximately $26.5 billion American Depositary Receipt (ADR) listing project, the largest foreign IPO in US history. Bank of America, Citigroup, Goldman Sachs, and JPMorgan were selected as joint bookrunners, making Morgan Stanley the only top-tier investment bank left out. With an underwriting fee of 0.5%, the total commission for this listing is roughly $1.3 billion. For an institution that prides itself on blockbuster IPOs like SpaceX and Anthropic and is seen as a front-runner for a potential OpenAI listing, this exclusion is not just a financial loss but a direct blow.
Repeated Bearish Calls Earning the Nickname 'Korea Semiconductor Reaper'
In Korean investment circles, mentioning Morgan Stanley's research division inevitably brings up Shawn Kim. A Korean-American managing director who joined Morgan Stanley in 2002, Kim oversees technology research for Europe and Asia. Having been based in Seoul and Hong Kong, he now works from London. In the Korean market, he has built significant influence through a series of sharply worded semiconductor reports, which have also earned him the moniker "Korea Semiconductor Reaper."
Over the past decade, he has repeatedly issued warnings near the peaks of Korea's semiconductor cycles. In 2017, he released a report warning about NAND prices and memory oversupply. In August 2021, he published "Memory, Winter is Coming," which accurately predicted a two-year semiconductor downturn. In September 2024, his report on the potential oversupply of HBM was considered a trigger for the sharp decline in Samsung Electronics and SK hynix stocks, with Morgan Stanley later acknowledging an error in its short-term earnings forecast for SK hynix. Korean media has even labeled him the "Korea Semiconductor Reaper."
On July 6, Morgan Stanley's equity strategy team, led by Chief Investment Officer Michael Wilson, advised reducing holdings in memory semiconductor stocks like Samsung Electronics, SK hynix, and Micron, a move described by Korean industry insiders as "rubbing salt in the wound" during a market already under downward pressure.
Kim's latest report is more systematic. It notes that NAND module maker inventories have risen to about 13 weeks, approaching the pandemic peak of around 15 weeks. Spot prices are weakening, and some cloud service providers have indicated ample inventory, including Tencent, which has secured about 90% of its required stock. He also proposed a trading logic of "sell DRAM when NAND declines," linking the two market segments into a single cyclical narrative.
Despite this, Joseph Moore, a US semiconductor analyst at the same firm, holds a more optimistic view. He believes AI data center investment will make DRAM a core bottleneck, with supply shortages potentially lasting until 2028. Their divergence stems from different perspectives: Moore focuses on capital expenditure by major US cloud providers, while Kim pays closer attention to early warning signals emerging from Asian distribution channels.
After Being Excluded by SK Hynix, Morgan Stanley Begins to Reflect
The exclusion from the SK hynix ADR listing, the largest foreign company IPO in US history, has triggered immediate repercussions within Morgan Stanley.
According to several investment bankers, including a former Morgan Stanley executive, a sentiment has emerged within the Seoul office: "Is it because of the negative reports from Shawn Kim and others that we lost this business with SK hynix? We need to be more cautious in the future."
This sentiment has also spread to Morgan Stanley's business lines responsible for raising funds from Korean institutional clients. According to Korean media reports, some departments have complained, asking, "How are we supposed to do business like this?"
This internal conflict reflects a structural dilemma common to international investment banks: the tension between the independence of the research department and the commercial interests of the investment banking division. If research reports are interpreted as market manipulation for business purposes, it damages credibility. Conversely, if self-censorship is applied to protect client relationships, the research loses its value.
A senior executive at a major domestic investment institution stated, "Morgan Stanley's consecutive deal failures in Korea seem to have driven them into a period of self-reflection. Being the only top bank excluded from the SK hynix listing has been a significant shock."
More Troubles: A Series of Major Deals Fall Through
The SK hynix project is not an isolated case. Morgan Stanley has recently seen several transactions it participated in or led in Korea end poorly.
The most notable is the controversy surrounding the SpaceX IPO. According to Korean brokerage firm Mirae Asset Securities, it applied for $1.14 billion through Morgan Stanley's lead underwriting system between June 5 and 10 and received a confirmation receipt, but ultimately received no allocation. Mirae Asset suspects Morgan Stanley may have omitted its application when transferring work to joint bookrunner Goldman Sachs. Since IPO allocation rights are entirely at the underwriter's discretion, Mirae Asset cannot formally hold them accountable. Bloomberg reported on June 30 that the failure was due to a procedural error by Mirae Asset. On July 14, Mirae Asset filed a civil lawsuit against Bloomberg, escalating the matter into a legal battle between a major domestic securities firm and an international media outlet. The Korean Financial Supervisory Service has completed an on-site inspection, with results expected in a few months.
Another awkward case involves the sale of IGIS Asset Management, led by Morgan Stanley and Goldman Sachs. IGIS is Korea's largest real estate asset manager, with 73 trillion won under management, including 2 trillion won in entrusted funds from the national pension fund. In December, the two investment banks designated Singapore-based Hillhouse Capital as the preferred buyer, but the deal fell through due to Hillhouse's financing issues. A competing buyer then reported to the police that price information was unilaterally leaked to Hillhouse during negotiations, implicating five people from IGIS's controlling entity and Morgan Stanley. It has also been reported that details of the national pension fund's entrusted investments were leaked during due diligence, drawing regulatory attention.
An earlier example dates back to 2017-2018 when Morgan Stanley published a report predicting that the stock of biopharmaceutical company Celltrion would be cut in half, sparking market turmoil. Celltrion questioned the report's credibility, and speculation emerged linking the report to short-selling activities.
A Deeper Dilemma: Research Independence vs. Business Interests
Behind this turmoil lies a structural dilemma common to international investment banks: the inherent tension between the independence of the research department and the commercial interests of the investment banking business.
If research reports are interpreted by the market as manipulation for business purposes, it damages credibility. However, if they are self-censored to protect client relationships, they lose their analytical value.
For Morgan Stanley, the controversy surrounding Shawn Kim's reports is not simply a case of "bearish calls inviting retaliation." In the past, his bearish forecasts in 2017 and 2021 proved to be forward-looking. However, his prediction regarding HBM in 2024 was off the mark. The source of his influence lies in the fact that for cyclical industries like semiconductors, when optimism builds to a peak, contrarian warnings can often trigger asset allocation adjustments by foreign institutions, creating a tangible impact on the Korean stock market.
From a valuation perspective, the price-to-book ratios of Samsung and SK hynix have recently fallen back to around 1.7 times and 2.5 times, respectively. These levels are significantly below their recent highs but still above their long-term historical averages. This valuation range reflects a neutral pricing logic by the market, which sees the memory industry as neither a pure cyclical stock nor a fully realized AI narrative.
In terms of methodology, the latest report from July 21 is more detailed than previous ones. It constructs a framework for a fourth-quarter price peak by cross-validating multiple signals, including NAND module inventory weeks, the ratio of earnings upgrades, and the pace of contract price increases. Morgan Stanley estimates the upper limit of HBM supply growth at about 40%. The report also includes a long-term total addressable market of about $250 billion for the memory innovation track, covering multiple technology paths such as capacity, bandwidth, and power consumption.
An investment banker summarized it directly: "For an investment bank, the track record of successful transactions is a key performance indicator. An accumulation of failures inevitably creates a burden."
Morgan Stanley's current predicament in South Korea may be the most realistic illustration of this logic.
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