Korean stocks are coming off their best week since 2008. Where the charts signal they’re heading next
The AI trade might just have to change its address from Silicon Valley to Seoul-icon Valley. In this week’s column, we’re going to deep dive into the charts to help guide our visual investing approach to identify newly emerging capital flows into emerging markets — specifically South Korea. Here are three fun facts about the current rotation: The Kospi hit all-time highs and last week posted its strongest weekly gain since 2008, which was also the last time emerging markets outperformed the U.S. South Korean semiconductor shipments surged almost 150% year over year in the first 10 days of May, hitting a record driven by AI server demand. Samsung Electronics just hit a $1 trillion USD market cap for the first time ever. As patriotic as I am, I’m also an opportunist and a capitalist and will follow the capital flows and allocate our investor capital where it will be best treated. U.S. exceptionalism — in terms of leadership in technology — may have to share its throne with Asia and specifically South Korea, Taiwan, China and Japan. Looking at the first chart of the S & P 500 and emerging markets ETF EEM , it shows a clear outperformance in favor of the U.S. relative to EEM since the 2010 GFC lows. The ratio topped out in 2025 and has begun to reverse sharply enough to threaten the entire 15 year uptrend. If we approach the 105 level on a monthly closing basis that’s enough to consider the reversal complete Looking at the country makeup of the ETF, we have Taiwan at 25.27%, China at 22.22% and South Korea at 20.55% — equaling 68% of the ETF. Obviously, it’s very heavily skewed towards Asia and that’s not counting India’s 11.44% representation. Breaking down to the sector weightings technology is 39.1%. The EEM ETF by itself is a solid investment and one we hold in portfolios for investors at Inside Edge Capital. Taiwan Semi alone is about 13% of EEM and the next 4 holdings are Samsung , Tencent, SK Hynix and Alibaba — all essentially the Asia AI hardware supply chain. In this column, we’ve also written about Latin America as a recipient of capital flows in the rotation into emerging markets. To further drive home our point, the following ratio chart of Emerging Markets / Latin America (EEM / ILF) shows a volatile back-and-forth consolidation since 2020. If resistance around 2 is broken, this strongly suggests the market’s clear preference for the Asian economies relative to Latin America within the emerging-tech trade. Specifically, within the emerging-Asian tech trade, I want to focus on the South Korean Kospi. Korea sits at the center of the global HBM (high bandwidth memory) and DRAM (dynamic-random access memory) supply chain, not to mention macro tailwinds including a weaker USD, an accommodative Bank or Korea and a record current account surplus. The next chart shows the Kospi/SPX ratio is now testing a downtrend that has held since the late 1980’s when Ronald Reagan was still in office. If the ratio breakout above 1.10 on a monthly closing basis, it’s game on in Seoul-icon Valley. I ran a scan on Koyfin for South Korean companies with the following attributes: Market cap > $5 Billion USD Revenue growth for next fiscal year expected to be > 10% Revenue growth for two fiscal years away expected to be > 10% EPS growth for next fiscal year expected to be > 15% EPS growth for two fiscal years away expected to be > 15% The scan returned 22 names including Samsung and SK Hynix and a look at the charts of each shows all highly extended and overbought status. The Kospi alone this year is up about 95%. I would NOT recommend running straight into these names and instead putting them on your hot watch list as the move has been parabolic here. The Kospi has had 8 single-day gains of 5% this year, also had a one-day drop of 12% in March during the Iranian war, and triggered market-halting circuit breakers multiple times this year. Another pullback is almost definitely coming. A tactical investor will wait for a public or at least a consolidation before entering as to define risk levels. It’s important to call this rotation for what it really is. This analysis isn’t really about the emerging markets, South Korea, or certainly a flight away from the U.S. It’s about the AI infrastructure trade being priced like the AI revolution is real and we may still be in the early innings. It’s not a winner-take-all kind of scenario. I see it as five components including compute, memory, networking, power and the grid that tie it all together. Wall Street was obsessed with the first one, computer (GPUs) in 2024. Now, in 2026 capital is rotating into the other 4 crossing international boundaries. Today, we’re focusing on the most supply-constrained of the 5 parts and that’s memory, where South Korea has a strong hold. The way I am planning to gain more South Korean exposure in our portfolios for our clients is in the new Roundhill Memory ETF (DRAM) . This ETF launched about 40 days ago, has gained about 100%, and attracted $5 billion-$6 billion in AUM in five weeks. As shown in the graphic below this ETF is 49.25% South Korea with its two top holdings are Samsung and SK Hynix. Looking at this newborn chart’s technicals, any pullback to $47-$45 is a solid entry point. However, with a growth / AI market that is practically crashing higher and you consider yourself a more aggressive investor / trader, a prudent move is to initiate one-half or one-third of your intended position here in the event it keeps running higher. If it pulls back in the zone and remains above support, you can initiate the balance of the position. -Todd Gordon, Founder of Inside Edge Capital, LLC We offer active portfolio management and financial planning for retail investors, as well as regular market updates like the idea presented above at www.InsideEdgeCapital.com . DISCLOSURES: Todd owns EEM personally and for clients in his wealth management company Inside Edge Capital, LLC. As of this writing, he does not yet own DRAM. Charts shown are Koyfin and TradingView. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
<
