Key points
▶ Bloomberg reported on September 9 (local time) that it had asked asset-management professionals where they would invest $10,000 (approximately 13.39 million won). Korean stocks, luxury-goods companies, and water-related businesses were among the choices.
▶ Although the Korean stock market is highly volatile, it was viewed as a market offering an inexpensive entry into the AI industry. The KOSPI is trading at approximately six times its projected earnings for next year.
▶ Russ Koesterich, global investment strategist at BlackRock, compared Korean semiconductor companies to “the picks and shovels” of the AI sector, saying they are “unusually cheap.”
▶ Luxury stocks were presented as a contrarian investment. The global luxury market is worth $1.6 trillion annually, while consumption is expanding beyond bags and watches to experiences such as travel, hotels, and dining.
▶ Water was identified as a long-term investment opportunity. Global water demand is expected to exceed supply by 40% in 2030, and of the $13 trillion needed through 2040, $7.5 trillion has yet to be secured.
Bloomberg identified the Korean stock market as a place to invest $10,000.
Bloomberg reported on September 9 (local time) that it had asked asset-management professionals where they would invest $10,000. Korean stocks, luxury-goods companies, and water-related businesses were suggested as markets offering both undervaluation and growth potential in the United States and overseas.
◆ A market that rose 90% and fell 35%
Volatility was the condition attached to the Korean stock market. Bloomberg reported that the KOSPI surged approximately 90% from its low in March to its June high before falling by around 35% within a few weeks. Based on the actual index data, it fell to 5,052.46 on March 31 before rising to an intraday high of 9,385.59 on June 19.
The increase was 85.8%. On June 23, the KOSPI plunged 9.99% in a single day, marking the largest decline in its history. On July 13, it fell to 6,806.93, dropping below the 7,000 mark. This represented a 27.5% decline from its intraday high in June.
The index later recovered. The KOSPI closed at 7,051.64 on September 9 and fell 17.72 points, or 0.25%, to 7,033.92 on September 10.
While stock prices were undergoing a correction, corporate earnings improved. According to the Bank of Korea’s second-quarter business management analysis released on September 9, the operating-profit-to-sales ratio for manufacturers stood at 24.0%, the highest level since statistics began being compiled in 2015.
The sales-growth rate also reached an all-time high of 39.6%. Bloomberg’s assessment was that valuation pressures had eased as stock prices fell while earnings increased. The KOSPI is trading at approximately six times its projected earnings for next year.
◆ “The picks and shovels of the AI gold rush”
The recommendation of Korean stocks was based on semiconductors. Russ Koesterich, global investment strategist at BlackRock, identified major technology companies such as Samsung Electronics and SK hynix as direct beneficiaries of demand for memory semiconductors used in AI data centers.
He compared these companies to “the picks and shovels” of the AI sector, calling them “unusually cheap.” The expression refers to investing not in companies mining gold, but in companies selling the tools used to mine it. It originated from the story that merchants who sold picks and shovels made more money than the prospectors during the 19th-century American gold rush.
As major cloud companies continue investing in data centers, Bloomberg reported that demand for memory semiconductors is likely to remain strong for the time being.
Risks were also noted. The KOSPI’s low valuation is based on the assumption that demand for memory chips will continue to grow. If the semiconductor cycle turns downward, the index could experience significant volatility.
◆ Luxury goods as a contrarian investment
The decline in luxury-stock prices itself was presented as a reason to invest.
Valuations of related companies have fallen in recent years as growth has slowed and consumer resistance to price increases has become more pronounced. However, analysts said demand itself has not disappeared. The global luxury market—including automobiles, hotels, and high-end dining—is estimated to be worth approximately $1.6 trillion annually. Consumption is expanding in the United States, India, Southeast Asia, and the Middle East as the number of wealthy consumers increases.
Consumer preferences are also shifting. Spending is expanding beyond traditional luxury goods such as handbags and watches to experiences including luxury travel, hotels, wellness, and dining. Experts advised investors to focus on companies with strong brands and distribution networks. Ultra-high-net-worth individuals, who account for approximately 40% of global luxury consumption, are likely to retain their purchasing power even as inflation and interest rates rise.
◆ $7.5 trillion short of the $13 trillion needed
Water was recommended on the basis of climate change and insufficient investment. Ian Harnett, an investment strategist at Absolute Strategy Research, forecast that global water demand would exceed supply by 40% in 2030.
He pointed out that $13 trillion in water-related investment would be needed by 2040, but $7.5 trillion has yet to be secured. The amount of water resources available per person worldwide has fallen by approximately two-thirds since 1960.
Potential investment areas included infrastructure to address floods and droughts, water treatment and recycling, leakage prevention, desalination, and water-quality sensors and data-analysis technologies. Exchange-traded funds (ETFs) cited in connection with the sector included the Invesco S&P Global Water Index ETF, First Trust Water ETF, and Invesco Water Resources ETF.
◆ Leveraged investing is rising again
Bloomberg reported that excessive borrowing by individual Korean investors had eased considerably as the leverage-driven investment surge seen last spring declined after the end of June.
Margin-loan balances peaked at 38.48 trillion won on June 22, when the KOSPI surpassed 9,000 for the first time. They subsequently fell to 28.94 trillion won on July 31, the lowest level in six months.
However, the trend changed in August. When the KOSPI and KOSDAQ rose together on August 5, margin-loan balances increased by 1.0141 trillion won in a single day. As the index stabilized, borrowing to invest began to recover.
Foreign trading is another variable. On September 10, foreign investors were net sellers of 2.7 trillion won worth of KOSPI-listed shares. Individual investors absorbed the selling and kept the index above 7,000.