Author: Chen Hanxue; Source: Wall Street News

Since the beginning of this year, Asian stock markets have been rising and falling against the backdrop of a strong US dollar. one.

Among them, some have achieved a bull market in stocks denominated in local currencies at the expense of exchange rate depreciation, while others have sacrificed part of the gains in the stock market at the expense of relatively stable exchange rates.

Only South Korea is a special case:

In terms of Korean won, the Korean Composite Index KSOPI has accumulated It fell 10.0%. After taking into account the fall of the Korean won, the KSOPI in US dollars fell 18.9%, both of which were the weakest in Asia.

The main declines occurred in the second half of the year. KSOPI once rose nearly 20% in 24H1, but all gains were wiped out in the second half of the year.

What will happen in South Korea in the second half of the year?

From the perspective of capital flow, since the second half of this year, only institutions in South Korea have maintained a net buying scale in the stock market, while the residents sector Has been cutting back on purchases.

Foreign investors are even more pessimistic. In November this year, foreign investors' net sales of South Korean stocks reached 4.15 trillion won, and they have been net sellers for four consecutive months. Within two weeks from the beginning of December, another net 2.4 trillion won was sold.

The money that Korean residents take out from the stock market is largely spent on " "Coin speculation".

Data from the Bank of Korea (BOK) shows that as of November, the number of cryptocurrency investors in South Korea has reached 15.59 million, an increase of 610,000 from the previous month. Currently, 30% of the 51 million Korean people are speculating in currencies.

The average daily trading volume of South Korea's five major cryptocurrency exchanges - UPbit, Bithumb, Coinone, Korbit, and GOPAX jumped from 3.4 trillion won in October to November 14.9 trillion won, an increase of more than four times.

South Koreans have always been keen on investing in cryptocurrency.

In the first wave of the cryptocurrency bull market in 2017, about 5% of the population participated; in the second round of the bull market in 2021, 10% of the population participated; Today this proportion has expanded to 30%.

However, historically, the Korean stock index and the price of Bitcoin have been positively correlated as a whole. Until October this year, this positive correlation was completely broken.

So the Korean stock market fell, and Bitcoin will take the blame?

In 2023, South Korea's exports will account for as much as 40% of GDP. As an export-oriented economy, exports are the barometer of the Korean economy.

South Korea’s latest exports seem to be picking up.

November export data released by the Korea International Trade Association showed that the export value in November increased by 1.4% year-on-year, maintaining growth for 14 consecutive months, but the trend has changed. Slowing down;

The export value data released by South Korean Customs for the first 10 and 20 days of December increased by 12.4% and 6.8% respectively year-on-year, indicating that December South Korea’s exports should not be weak.

But behind this phenomenon, it is more likely to be caused by Trump’s tariff concerns A false start.

Based on export fundamentals, South Korea’s main export industries, including semiconductors, automobiles, and chemicals, are all facing unfavorable prospects.

Figure: South Korea’s export structure in 2022

First of all, it is the weakness of semiconductors.

South Korean local semiconductor giant SamsungElectronics and SK Hynix mainly focus on memory chips, which only account for about 30% of the entire semiconductor market. Compared with Taiwan, which has a complete supply chain including chip manufacturing, packaging and testing, South Korea's presence is weak.

Trend Force data shows that in the second quarter of this year, TSMC’s share of the global foundry market was 62%, while Samsung Electronics was only 11%. The two companies The gap has widened from 36.5% in 2020Q3 to 51% today.

Insufficient support is the main reason. South Korea lacks subsidies similar to those in the United States, mainland China, and Taiwan, making it difficult to promote chip localization.

South Korean semiconductors are also highly dependent on overseas materials, components and equipment. Data from the Korean Customs Service shows that among the 13 subdivisions of semiconductor equipment, more than half have long-term trade deficits.

In particular, Yin Xiyue chose to hard decouple from the market, resulting in Korean semiconductors that were extremely dependent on the market. The industry fell off a cliff. Among chip imports in 2023, the proportion of chips shipped by Korean companies has dropped to 6.3%, which had previously remained above 10%.

Secondly, the automobile manufacturing industry is also at a clear disadvantage in the competition.

In 2023, the total global sales of Korean cars will be more than 8 million, a year-on-year increase of more than 7%, but the share of new energy vehicles is only 9.3%.

It is currently the largest and fastest growing new energy vehicle market in the world. In 2023, the total sales of automobiles will be 30.09 million units, and the share of new energy vehicles will be as high as 31.6%. The scale of the automobile industry is nearly four times that of South Korea, and the share of new energy vehicles is more than four times that of South Korea.

Compared to German, American and Japanese car companies, based on the characteristics of consumers, they actively launch long-term When it comes to wheelbase, customized versions and other models, Korean car companies have been slow to move and have insufficient research and development efforts. Coupled with the transformation difficulties in new energy, Korean cars are in a difficult situation in the market.

Finally, petroleum productsExports (of the oil refining industry) are also facing certain downward pressure.

In November this year, South Korea's largest refiner SK Energy announced its third-quarter results:

The operating loss of the refining business in the July-September quarter was 616.6 billion won (US$450.2 million), the largest loss since the fourth quarter of 2022.

The company said,

“We are facing an adverse macro backdrop, Crude oil prices have fallen, and the overall refining products market has been squeezed...

The minimum operating rate of crude distillation units (CDUs) will continue to be maintained to prevent negative profit margins..."

London Stock Exchange data shows that Asia's refining profit margins fell to a new low since the third quarter of 2022 from June to August this year.

Today, under the influence of a large number of prospects and potential for increasing production and gradually disappearing demand, the market is bearish on oil prices for a long time, restricting the production and export prospects of refiners. .

The latest results of the 2025 Business Outlook Survey released by the Korean Enterprise Federation show:

Due to widespread concerns about export conditions, 65.7% of the companies surveyed stated that they have formulated business plans for next year, of which 49.7% have a business policy of "tightening operations", which is the highest level since the 2019 survey.

The Bank of Korea said,

"Additional interest rate cuts will be made in 2025 to ease the downward pressure on the economy."

Facing exchange rate headwinds, the Bank of Korea's unhesitating attitude is even more highlighted. Its economy is weak.

The recent outbreak of emergency martial law by the President of South Korea has made South Korea's already weak fundamentals even worse.

On November 29, the Budget and Final Accounts Committee of the Korean National Assembly held a meeting with the ruling partyIn the absence of members of the ruling party, the budget reduction bill was forcibly passed, which fully reduced the special activity fees of the President's Office, the Prosecutor's Office, the Supervisory Office and the police. At the same time, it significantly reduced the emergency reserve fund, with a total reduction of 4.1 trillion won, which means that next year Yin Xiyue will be suspended due to lack of money.

On December 3, South Korean President Yoon Seok-yue launched martial law, pushing the dispute between the government and the court to a climax.

The dispute between the government and the Yuan is actually a budget dispute. South Korea's financial pressure has been extremely severe in the past two years.

Yin Xiyue enacted tax cuts for the wealthy in 2023, resulting in the largest fiscal and tax reduction in South Korea's history. The settlement report of South Korea's Ministry of Planning and Finance shows that South Korea's total tax revenue in 2023 will be 497 trillion won, a decrease of 77 trillion won from the previous year's settlement.

Yin Xiyue's move is actually "robbing the country to enrich the country."

Today, South Korea's fiscal deficit is still significant. In September this year, the deficit reached 52.89 trillion won, accounting for 2% of nominal GDP in 2023.

In response to the financial crisis, Yoon even cut South Korea's scientific research budget by 15% this year , the first time South Korea has made such a decision since 1991.

On December 15, the South Korean Congress officially passed the impeachment case against South Korean President Yoon Seok-yue. On the 16th, Han Dongxun, leader of South Korea’s ruling party, announced his resignation as party leader. …

Even if the impeachment case has doomed Yin Xiyue's defeat, the future of South Korea's political situation has become more confusing, which may further intensify the bearish sentiment of foreign investors.

With domestic and foreign investors not optimistic about it, where will the Korean stock market go next year?