South Korean Stocks Set Up A Bullish Technical Pattern
Market conditions in South Korea are supported by positive factors. Demand for AI-related memory products has increased, the won has strengthened, and the market has shown positive momentum. EWY is now approaching a threshold that could allow for further gains, provided that it is supported by continued volume. Investors seeking exposure to the semiconductor cycle may find this an attractive option, as it avoids the higher valuations seen in parts of the U.S. tech sector.
The South Korean stock market is one of the cleanest ways to trade the global memory and semiconductor cycle without buying U.S.-listed semiconductor names that are now at all-time highs. Samsung Electronics (SSNLF) and SK Hynix (HXSCL) are the world’s two largest memory makers, and together they make up roughly 45% of the iShares MSCI South Korea ETF (EWY), my preferred vehicle to trade the South Korean market. They are the direct beneficiaries of the memory shortage I wrote about a few weeks ago, where the AI CapEx cycle has run headlong into an undersupply of the high-bandwidth memory (“HBM”) that AI chips require—the kind that Samsung and SK Hynix make. Pricing for memory chips has roughly doubled in projected forecasts over the last few months, and the two firms with the manufacturing scale to actually meet that demand are Korean and not listed in New York, even as ADRs. EWY has been responding accordingly, but the chart has set up something more interesting than just a momentum trade. It’s been carving out a familiar technical pattern over the last few months—the inverse head and shoulders—and it just printed the second shoulder.