Concern is growing over the “Korea-linked” phenomenon, in which developments in the South Korean market affect Japanese stocks, as sharp swings in semiconductor stocks such as Samsung Electronics spill over into the Japanese market.
A South Korean business media outlet reported that concern is growing in Japan’s securities industry over the “Korea-linked” phenomenon, in which Japanese stocks are excessively swayed by the South Korean market. Reports by Japanese media cited in the article pointed out that sharp swings in semiconductor-related stocks are directly affecting the Japanese market as well.
As a result, factors that should normally drive investment decisions, such as the earnings and growth prospects of Japanese companies, are less readily reflected in share prices, while overseas long-term investors have also been slow to resume buying.
Japan and South Korea have high weightings in AI and semiconductor stocks, and overseas investors effectively treat them as part of the same investment group. Consequently, when supply and demand in the South Korean market cause prices to swing sharply, the Japanese market repeatedly moves in the same direction, the report explained. In addition, yen appreciation following currency interventions by Japan and the United States has dampened earnings expectations for exporters and become a factor weakening investment appetite.
The report said comments from Korean internet users included, “An era is coming in which South Korea’s stock market will have a decisive impact on neighboring countries,” and, “This small country has that much influence?”.