South Korean stocks have plummeted to their lowest point in a year, driven by foreign investors selling major exporters such as Samsung Electronics (SSNLF, Financial). This sell-off is attributed to concerns that these exporters are vulnerable to protectionist trade policies from the United States under Trump's administration.
The Kospi index, South Korea's benchmark index, fell 2.6%, marking it as the worst-performing market in Asia. This decline was part of a broader sell-off across Asian markets due to worries that tariffs and policies proposed by the new U.S. administration could lead to increased inflation.
Samsung Electronics, the world's largest memory chip maker, and steel giant POSCO were the main contributors to the Kospi's decline. Samsung's stock price has dropped to its lowest level in over four years, highlighting the impact of the U.S. isolationist trade stance, especially regarding higher trade barriers on globally integrated economies like South Korea.
In 2023, exports accounted for nearly 36% of South Korea's GDP, according to the Korea International Trade Association. Jung In Yun, CEO of Fibonacci Asset Management Global Pte, noted that foreign investors are selling Korean won and exporting companies, particularly Samsung, while holding cash until the "Trump effect" subsides.
Adding to market woes, Korea Zinc decided to cancel an $1.8 billion stock issuance plan, which had surprised investors just two weeks prior. Shawn Oh, an NH Investment & Securities trader, claimed that Trump's election is a net negative for South Korea, pushing stock-only buyers and macro funds to reduce their allocation in the country.
The market is already unsettled due to apprehensions surrounding Samsung, a major component of the index. Although the Korean tech giant is a significant player, concerns have arisen over its ability to capture a larger market share in the artificial intelligence memory chip sector. Samsung has lagged behind competitors like Taiwan Semiconductor Manufacturing Co. (TSM) and Nvidia (NVDA) in capitalizing on the surge in AI chip demand.
BNK Investment & Securities Analyst Lee Min-hee pointed out that potential tariffs on Chinese imports by Trump are seen as a greater threat to Samsung, which relies more on Chinese customers compared to its domestic competitor SK Hynix. SK Hynix has been expanding its sales of high-end AI server chips to U.S. customers like Nvidia.
Hyundai Motor Securities Analyst Greg Noh warned that Trump’s threats to impose a 10% tariff on imports and a 60% tariff on Chinese goods would likely dampen demand for electronic products using chips. South Korean President Yoon Suk-yeol also expressed concerns that Trump's high tariff threats on Chinese imports might prompt Chinese competitors to drastically lower export prices, undermining the export competitiveness of South Korean chip companies.
Since the Kospi index peaked in July, Samsung's stock has tumbled approximately 42%. The tech-heavy Kosdaq index has also reached its lowest point since January 2023. As of this year, Samsung's shares have decreased by 34%, potentially marking its worst annual performance in over two decades. In contrast, SK Hynix's stock has risen 32%, and Nvidia's stock has surged by 199% this year.
