Japanese and Korean stock markets experienced another strong surge. On May 21, reversing the previous day's weakness, both markets opened higher. The South Korean KOSPI Composite Index even triggered a circuit breaker during the session before continuing its climb. By the close, the Nikkei 225 index had risen 3.14% to 61,684.14 points, while South Korea's benchmark KOSPI index closed up 8.42%, gaining 606.64 points to finish at 7,815.59 points.
According to reports, the labor-management negotiations at Samsung Electronics, which restarted on the afternoon of May 20, concluded late that night with the signing of a tentative agreement. The Samsung Electronics union stated that the major strike originally planned for May 21 would be suspended. The union will internally vote on the tentative labor agreement, and subsequent actions will depend on the outcome.
Beyond the positive news of the eased strike threat at Samsung Electronics, the rise in U.S. stock markets on May 20, led by semiconductor shares, is also seen as a key factor supporting the sharp gains in the Korean Composite Index. Regarding the Japanese market, a nearly 20% surge in SoftBank Group's share price drove the Nikkei 225 higher. Foreign capital has been a net buyer of Japanese stocks for seven consecutive weeks, indicating sustained inflows.
The exchange rates of the Japanese yen and South Korean won against the U.S. dollar continue to show an inverse relationship with their respective stock markets. An analyst noted that while a moderately weak yen and won provide short-term positive stimulus for their stock markets, they could lead to long-term risks such as inflation and capital outflows. It is anticipated that the subsequent movements of the yen and won will exhibit a pattern of weak volatility.
Japanese and Korean Stock Markets Soar Again On May 21, the South Korean stock market triggered a circuit breaker due to rapid gains. By the close, the KOSPI index firmly held above the 7,800 point level, marking its largest single-day gain since April 1.
The semiconductor and automotive sectors showed particularly strong performance. Heavyweight stocks Samsung Electronics and SK Hynix saw their shares close up 8.51% and 11.17%, respectively. Other stocks in the same sector, such as Jeju Semiconductor and Hanmi Semiconductor, rose 24% and 15%, respectively. In the automotive sector, Hyundai Motor and Kia both gained over 12%.
Analysis suggests that a strike at Samsung Electronics, a crucial global memory chip manufacturer, could have exacerbated the tightening global semiconductor supply situation driven by the ongoing boom in AI data center construction, potentially impacting multiple industries including automobiles, computers, and smartphones. The analyst believes that the suspension of the major strike by the Samsung union on the 21st removed the market's biggest uncertainty, acting as a key catalyst for the KOSPI's surge.
Japanese stocks also performed strongly. By the close, the Nikkei 225 index had risen 1,879.73 points, its largest single-day gain since May 7. The analyst stated that the Nikkei's gain of over 1,800 points was primarily influenced by news of OpenAI's impending IPO, which caused a sharp rise in the share price of SoftBank Group, a major investor in OpenAI, subsequently lifting the Nikkei index.
The analyst believes the main drivers behind the significant rebound in Japanese and Korean stocks on the 21st are largely consistent with previous upward phases. Firstly, U.S. President Trump's announcement on the 20th that U.S.-Iran negotiations were entering their final stage sparked increased market optimism about an end to Middle East conflicts. This lowered global risk premiums and pushed Asia-Pacific stock markets higher collectively. Additionally, the strong overnight rebound in U.S. tech stocks, with chip giants like NVIDIA and AMD reporting better-than-expected earnings, provided external support for the Asia-Pacific tech sector. Furthermore, following consecutive adjustments, the Nikkei and KOSPI indices had a technical rebound demand. The convergence of these multiple positive factors triggered a concentrated influx of capital.
Notably, the semiconductor and tech sectors within the Japanese and Korean markets showed the most significant gains. On the 21st, semiconductor and tech stocks like Samsung Electronics, SK Hynix, and SoftBank Group led the gains. The analyst attributed their rapid rise to being highly correlated with the full-scale outbreak of the AI industry's super-cycle, combined with industry cycle reversals and positive catalysts for individual stocks.
From an industrial logic perspective, as the world's top two memory chip manufacturers, Samsung and SK Hynix monopolize the high-end HBM (High Bandwidth Memory) market. HBM is a core scarce resource for training AI large models, with demand growing exponentially alongside computing power expansion. Memory chip prices have entered a clear upward cycle, and institutions widely anticipate that the earnings of these two companies will continue to surge over the next several quarters. SoftBank's sharp rise directly benefits from OpenAI's IPO expectations. Its $64.6 billion bet on OpenAI is expected to yield over $45 billion in floating profits post-listing. Additionally, the plan for SB Energy's spin-off IPO has raised valuation expectations. As a benchmark enterprise in the AI field, OpenAI's listing will further strengthen market investment confidence in the AI industry chain. Furthermore, AMD's stock price surged 18% overnight, and NVIDIA's earnings continue to exceed expectations, validating strong AI chip demand and creating a global tech sector linkage effect. The removal of the strike risk at Samsung eliminated a potential disruption in the AI supply chain, making capital more willing to invest in semiconductor leaders. These multiple factors collectively propelled the tech sector to become the market's leading gainer.
Yen and Won Exchange Rates Inverted with Stock Markets While the Nikkei and KOSPI indices rose, the exchange rates of the Japanese yen and South Korean won against the U.S. dollar remained weak.
As of 4:00 PM Beijing Time on May 21, 1 U.S. dollar exchanged for 159 Japanese yen, and the won broke through the 1,500 level against the dollar, with 1 U.S. dollar exchanging for 1,505.9 won.
In the analyst's view, a moderately weak yen and won have a positive stimulating effect on their respective stock markets in the short term. A weaker yen enhances the competitiveness of Japanese export-oriented enterprises, especially leading manufacturers in sectors like automobiles and electronics. It also attracts overseas capital inflows seeking dual returns from currency and stock price gains. The rise of the Nikkei index and yen depreciation form a positive feedback loop. Against the backdrop of a weak yen, Japanese stocks are expected to maintain an upward trend.
Similarly, the analyst believes a weak won also benefits South Korean export-oriented enterprises. Particularly for semiconductor giants like Samsung and SK Hynix, whose overseas revenue accounts for over 80% of their total, a weaker won can directly boost translated financial statement profits, supporting their share prices.
In reality, both the Japanese and South Korean governments are wary of the risks associated with excessively rapid currency depreciation. Previously, to prevent speculative forex trading, South Korea's Ministry of Economy and Finance and the central bank also intensified verbal intervention. The analyst expects the exchange rate trends of the yen and won will continue to show a pattern of weak volatility, and the market still needs to monitor the potential market risks arising from increased exchange rate fluctuations.
Following multiple days of adjustment, the Nikkei and KOSPI indices once again attracted capital inflows, leading to a sharp stock price surge. Can Japanese and Korean stock markets maintain their upward momentum going forward?
The analyst noted many factors support the Nikkei and KOSPI. First, core support comes from the sustained prosperity of the AI industry, with a clear upward cycle in memory chip prices. Earnings of leading companies like Samsung and SK Hynix are expected to continue exceeding expectations. Second, if U.S.-Iran negotiations make substantive progress, it will further reduce risk premiums, attracting global capital back to the Asia-Pacific tech market. Third, the gradual recovery of South Korean export data, steady profit growth of Japanese companies, and continued foreign buying provide liquidity support for the markets.
However, the analyst also cautioned that amidst these multiple positive factors, several risks must be vigilantly monitored: First, the indices' over-reliance on tech leaders. If AI demand falls short of expectations or memory chip prices correct, it could trigger a chain reaction of adjustments. Second, increased retail margin trading exacerbates market volatility. The current retail leverage ratio in the South Korean stock market has reached a historical peak. Once market sentiment shifts, concentrated selling and sharp price declines could easily occur, leading to a stampede scenario. Third, geopolitical uncertainties remain. The U.S.-Iran negotiation process could see reversals, and adjustments to the U.S. Federal Reserve's policies could also impact global liquidity.
"The Japanese and Korean stock markets still possess momentum for periodic gains going forward, but volatility will significantly increase, and divergence will intensify. It will likely be difficult to see another one-sided surge," the analyst concluded.
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