During political crisis, AI and Trump remain key influencing factors in the South Korean stock market.

Despite the political crisis engulfing the 1.6 trillion US dollar Korean stock market in 2025, artificial intelligence and Trump are still key considerations for stock pickers. Meanwhile, the ongoing corporate valuation enhancement plan is another important theme for South Korea, one of the world's worst-performing stock markets. Companies continue to support the plan, despite doubts about its political momentum due to the poorly received martial law controversy and impeachment of the South Korean president. With global investors accelerating their exit from the Korean stock market, the benchmark Kospi index is set to experience its longest consecutive monthly decline since 2008. The index has fallen over 8% so far this year, while the Morgan Stanley Capital International (MSCI) Global Stock Market Index has risen 18% during the same period. Although the Korean stock market is dominated by technology stocks, the price of heavyweight company Samsung Electronics has fallen by 32% so far this year due to failures in the artificial intelligence field, dragging down the Korean stock market. Meanwhile, Trump's threats during his campaign to impose tariffs on Korean tech exports and the future of electric car demand have cast a shadow over the industry. Investors suggest that the Korean stock market will continue to struggle in the coming months as the Constitutional Court reviews the impeachment of the president. At the same time, investors' funds may continue to be withdrawn from the Korean stock market. However, there are some bright spots in the Korean stock market as the themes of artificial intelligence and corporate governance improvement continue to create winners. Overall, the undervaluation of Korean stocks may also provide some attractiveness. Yi Ping Liao, assistant manager of the Franklin Templeton Emerging Markets Stock Investment Portfolio, said, "What we're seeing in the market right now is overly pessimistic. Although the economic and profit prospects are weak, we do have quite a bit of valuation cushion. This in turn creates opportunities from the bottom up." Winners Power equipment suppliers are among the biggest winners in the Korean stock market this year. Investors are betting that the demand for electricity in artificial intelligence data centers will trigger the need for new and upgraded equipment worldwide. HD Hyundai Electric Co., which produces transformers and generators, has increased by over 370% so far this year, ranking at the top of the Kospi index. Another star this year is Samyang Foods Co., whose stock price has risen by over 250% due to a viral video spreading on TikTok increasing demand for its spicy instant noodles in the US and elsewhere. Kim Doo-Yong, CEO of Must Asset Management, stated that Samyang Foods still has "reasonable upside potential" in its stock price, as attention and funding will shift to a few attractive stocks when the overall market is not appealing. The Korean banking sector is expected to have its best year since 2017, as it is believed they will respond more quickly and actively to government corporate reforms and increase shareholder returns. Leading the industry is KB Financial Group Inc., whose stock price has risen by nearly 60% this year, potentially achieving its best annual performance since 2009. Losers Samsung Electronics is preparing for its worst year since 2000. Falling behind in the production of storage chips paired with artificial intelligence processors - high bandwidth memory (HBM) - has raised doubts about its technological leadership. Global investors net sold about $7 billion worth of Samsung Electronics stock in 2024. Two months ago, the South Korean technology giant reported progress in supplying its most advanced chips to NVIDIA Corporation (NVDA.US), but investor hopes have since faded. Meanwhile, SK Hynix, a competitor to Samsung Electronics, has benefited from the dilemma as its stock price has risen by over 20% this year thanks to market excitement over its artificial intelligence products. In addition, 2024 was a dismal year for Korean electric car battery suppliers, a sector that was once loved by the country's retail investors. Major stocks trading on the theme, such as Samsung SDI, POSCO and LG Chem, have dropped by around 50%, while the smaller Ecopro BM Co. has plummeted by over 60%. Korean electric car battery suppliers have been hit by weak demand outside of China and Trump's pledge to abolish the US "Reducing Inflation Act," which provides subsidies for American consumers to purchase electric cars. However, Yi Ping Liao suggests that the outlook for next year may improve due to EU emission policies, more affordable models, industry consolidation, and signs of growth. She added that while it is difficult to say whether the Korean electric car battery industry has hit rock bottom, "we may be close to it."