South Korean equities are regaining favor from both global top-tier asset management giants and domestic retail investors, driven by easing U.S.-Iran tensions and a sustained surge in artificial intelligence (AI) hardware demand. BlackRock, the world's largest asset management firm, recently indicated that South Korean stocks were a key factor behind its decision to upgrade its rating on emerging markets. Concurrently, domestic "wait-and-see" capital, which had been sidelined due to Middle East conflict concerns, is flowing back into the market in large volumes, with margin trading balances hitting a record high.
BlackRock upgraded its ratings on U.S. and emerging market equities to "overweight" this week, citing earnings upside potential for both asset classes. Despite ongoing tensions involving Iran, global corporate earnings forecasts for 2026 continue to rise, with the AI theme serving as a major supporting factor. Wei Li, BlackRock's Global Chief Investment Strategist, stated, "South Korea is a significant reason for our upgrade of emerging markets. Positioned at the core of the technology supply chain, it demonstrates strong growth momentum." She highlighted robust market demand for AI-related hardware and explicitly affirmed, "We are absolutely positive on the South Korean stock market."
The most direct evidence supporting this view comes from a dramatic jump in earnings expectations. Compiled data shows that the expected forward earnings growth rate for South Korea's benchmark KOSPI index has surged from 43% at the start of the year to approximately 170% currently. Despite significant volatility influenced by Middle East geopolitical conflicts, the index is poised to recoup its earlier losses, having climbed 47% year-to-date for 2026, outperforming most major global equity indices.
Addressing market concerns about the South Korean market's heavy concentration in a few large chip stocks, Li suggested that this is characteristic of a technological transformation phase rather than a flaw. "People view single-stock concentration as a risk, but in fact, during cycles of technological change, this is precisely a feature of the current market environment," she commented. "At this stage, we are not particularly worried about this concentration issue."
BlackRock's optimism is echoed by the movement of domestic capital in South Korea. As both the U.S. and Iran expressed willingness to re-engage in negotiations, market liquidity that had frozen due to war fears quickly thawed. Data from the Korea Financial Investment Association on the 16th showed that as of April 14, the balance in investors' margin accounts reached 117.6724 trillion won, hitting its highest level in three weeks and largely recovering to pre-conflict levels seen in late February. Investor margin balances are often viewed as "sideline cash" for the stock market, and their rapid expansion signals a notable recovery in investment confidence.
Notably, since hitting a post-conflict low on April 6, this indicator surged by over 10 trillion won in just six trading days, boosted by news of a "two-week ceasefire." Although the first face-to-face truce talks held in Islamabad over the weekend ended without agreement, both U.S. President Trump and Iranian officials expressed strong willingness to resume discussions. Lee Kyung-min, an analyst at Daishin Securities, noted that Trump's comments suggesting the war was "nearing its end" and that "progress might be made within the next two days" significantly bolstered market expectations for a final resolution. Concurrently, ceasefire negotiations between Israel and Lebanon were seen as a positive factor for mitigating risks related to potential blockades in the Strait of Hormuz.
Signs of a recovering stock market quickly ignited leveraged trading enthusiasm among South Korean retail investors. Data shows that as of the 14th, the credit transaction balance—commonly referred to as "borrowing to buy stocks"—climbed to 33.2824 trillion won. The credit balance specifically for the mainboard Kospi market reached 23.406 trillion won, setting a new historical record. Fund flow analysis indicates that this round of credit expansion was highly concentrated in the semiconductor sector. For example, industry leader Samsung Electronics saw its margin financing balance soar to 3.4126 trillion won, a 107% increase since the end of last year and a 47% rise from pre-conflict levels. Similarly, SK Hynix's credit balance grew 30% during the same period to 2.2656 trillion won.
Market analysts believe that better-than-expected performance from semiconductor giants is the core catalyst attracting high-risk appetite capital. Despite supply chain concerns triggered by the conflict, Samsung Electronics reported quarterly operating profit of 57 trillion won on the 7th, far exceeding market expectations, which significantly restored investor confidence in the fundamentals of technology stocks.
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