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Dan Watkins, the CEO of Asia Pacific at J.P. Morgan Asset Management, speaks during an interview with JoongAng Ilbo and the Korea JoongAng Daily at the Korea Investment & Securities headquarters in Yeouido, western Seoul, on March 17. [WOO SANG-JO] Korea’s benchmark Kospi is expected to remain attractive over the next five years despite its recent volatility, with the pullback following the outbreak of the Iran war potentially offering an entry point for investors, according to J.P. Morgan Asset Management (JPMAM). While rising energy prices and the risk of a broader economic slowdown from the Iran war could weigh on Korea’s export-driven economy in the near term, its strong semiconductor sector and ongoing market reform initiatives could prove to be key catalysts for a significant rerating. “Kospi’s sharp rise has brought valuations close to global averages, yet they remain reasonable compared to developed markets,” said Dan Watkins, the CEO of Asia Pacific at JPMAM, in a written interview with JoongAng Ilbo and the Korea JoongAng Daily. The comments came ahead of his visit to Seoul to sign a partnership with Korea Investment & Securities last Tuesday, following the exclusive launch of onshore funds in Korea earlier in the month through the local brokerage. Related Article Korea Investment & Securities, J.P. Morgan sign MOU for global investment expansion ‘Roller Kospi’: Iran war sends Korea’s market on a meme-fueled ride Won hits 17-year low as surging energy prices, Fed hawkishness rattle market “Foreign ownership remains below historical highs, suggesting room for additional inflows as reforms take hold and market confidence strengthens,” said Watkins, pointing to the amendments to the Commercial Act requiring listed companies to cancel newly acquired treasury shares and the introduction of a separate taxation system for dividend income as part of broader efforts to revitalize the stock market. “The sustainability of this rally ultimately depends on the execution of reforms and tangible progress across corporates,” he added. The optimistic outlook aligns with JPMorgan strategists’ view from early February, when they raised their bull-case target for the Kospi to 7,500, citing continued government reforms, broader investor participation and improving prospects for the semiconductor and industrial sectors. Tai Hui, the chief market strategist for APAC at J.P. Morgan Asset Management, speaks during an interview with JoongAng Ilbo and the Korea JoongAng Daily at the Korea Investment & Securities headquarters in Yeouido, western Seoul, on March 17. A buying opportunity amid the storm Escalating geopolitical tensions in the Middle East have dealt a heavy blow to Korea’s financial market, triggering sharp volatility. The Kospi fell as much as 12 percent in a single day on March 4, and the dollar-won exchange rate has repeatedly breached the psychological threshold of 1,500 over the past three weeks. The impact has been particularly pronounced given the country’s heavy exposure to the cyclical semiconductor sector, which is highly sensitive to global demand cycles and macro conditions, including energy prices. “As a net oil importer, Korea is vulnerable to sustained energy price increases,” said Watkins. For example, a persistent rise in oil could materially pressure GDP growth and corporate margins. "As an open, export-reliant economy, Korea is also exposed to any global demand slowdown stemming from broader geopolitical or macro shocks," he continued. Korea relies on the Middle East for roughly 70 percent of its crude oil imports, meaning that a continued increase in oil prices could raise production costs in the manufacturing sector, stoking inflationary pressures and slowing the economy. While acknowledging the near-term risks, JPMAM sees the recent pullback as creating selective buying opportunities, with Watkins describing the recent equity market sell-off in Asia as “indiscriminate.” “We view the structural drivers for North Asian equities to remain intact. Hardware supply-demand dynamics should stay tight through this year and potentially into the next,” he said, pointing to strong data center demand and its reliance on memory chips — a segment in which Korea’s Samsung Electronics and SK hynix are at the forefront. The rosy outlook is expected to continue over the next three to five years, driven by the chip sector. While the returns of major Big Tech giants on their massive AI investments remain uncertain, their suppliers — chipmakers — are already generating meaningful returns as their investment continues, according to Tai Hui, the chief market strategist for APAC at JPMAM, who separately sat down for an interview in Seoul on that same day. “There are plenty of hyperscalers in the United States that will compete: Some will be successful, while some will not be,” said Hui. “But [...] especially in the world of memory chips, Korea has a very strong competitive edge. It’s a very dominant player in the market. As long as data center demand is there, a lot of the components are going to come from Korea.” He also noted strong prospects for other sectors, including shipping, defense and petrochemicals, that are expected to drive up the country’s exports. SK hynix posted a record operating profit of 47.2 trillion won ($31.28 billion) for the entirety of 2025, more than doubling from a year earlier, while Samsung Electronics reported 43.6 trillion won in operating profit over the same period, up 33 percent on year. An evolved investment strategy While large tech firms tied to AI remain an effective investment, JPMAM said its approach to investing in AI has evolved, emphasizing the importance of diversifying its portfolio across both countries and sectors. “The theme has broadened out to other AI innovators within tech, AI enablers in sectors like industrials, utilities and materials as well as AI adopters in financials and healthcare — all of which boasted double-digit earnings growth in the most recent quarter and reflecting AI’s expanding economic footprint,” Watkins said while acknowledging the underperformance of the Magnificent Seven stocks — Microsoft, Nvidia, Alphabet, Amazon, Meta, Apple and Tesla — relative to the broader index this year. “A lot of our preference at the moment is Northeast Asia,” said Hui, citing semiconductors from Korea and Taiwan and assembly components from Japan. He also noted that China, despite weak consumer spending, remains an attractive market, given its advances in AI and the expectation that Chinese tech companies will be able to integrate AI models into their services to deliver stronger earnings performance. “So there are plenty of opportunities in Asia," he added. The importance of diversification — both in terms of countries and sectors — led JPMAM to launch the fund with Korea Investment & Securities on March 9, eight years after returning its asset management license to transition into an investment advisory firm. More than 85.2 billion won has been invested in the fund in the first 10 days of operation. The decision reflects sustained demand from Korean investors for global diversification, as well as their pursuit of growth and income and their desire to balance domestic exposures, according to Watkins. Against this backdrop of the perceived needs for portfolio diversification, JPMAM encourages investors to stay invested. “Cash is not a good asset, even with high volatility right now. It is a matter of repositioning your portfolio. So stay invested,” Hui said. However, he added that gold, the traditional safe-haven asset, is “not a very good hedge asset in a period of high market volatility,” pointing to its failure in recent weeks to perform its expected role as a hedge as it faced headwinds from dollar strength and higher rate expectations. Gold posted a modest gain rather than a sustained surge following the outbreak of the Iran war, with prices in Korea largely moving within a 1 percent range during the first week after an initial 4 percent spike at the onset of the conflict. It plunged more than 6 percent on Monday as the conflict continued. JPMAM states there are alternative ways to stay invested even when markets diverge from established patterns. “From an asset allocation perspective, investors could look at real assets, such as transportation infrastructure, which could present resilience during bouts of geopolitical tension,” Watkins said. “Markets historically recover from geopolitical shocks relatively quickly unless they morph into a prolonged growth shock, which is not our base case.” BY JIN MIN-JI, PARK YU-MI [jin.minji@joongang.co.kr]
