South Korea Daily Briefing

South Korea's government and financial industry ran their largest ever 'Buy Korea' IR campaign over three weeks — and foreign institutional investors responded by selling ₩26 trillion in Korean equities, with only two days of net buying during the entire period. Eight-plus consecutive months of foreign outflows have now deepened into an acceleration, driven by US Treasury yield spikes pulling capital back to dollar assets and growing questions about AI sector investment return timelines. Korean equities now trade at multi-year lows relative to book value, but the catalyst for reversal is elusive without a clear US rate peak signal.

The government announced plans to re-consolidate five state power generation companies (KOEN, KOMIPO, KOWEPO, KOSPO, EWP) into a single 'Korea Power' entity by October 2027, reversing a 26-year-old competition reform. The consolidation aims to eliminate operational redundancy and strengthen KEPCO's fuel procurement leverage — margin-positive for KEPCO's beleaguered credit profile. For equity investors, KEPCO's recovery thesis gets a structural support, though the merged entity's capital expenditure for renewable transition remains a wildcard that could offset margin gains from consolidation.

Changxin Memory Technologies (CXMT), China's domestic DRAM manufacturer, is forecasting Q3 2026 revenue growth of approximately 600% year-over-year — a staggering ramp that signals China's memory industry is moving aggressively up the cost curve toward Samsung and SK Hynix territory. For Korea's semiconductor champions, this is a medium-term competitive threat: CXMT is targeting commodity DRAM initially, but history shows memory fabs move upmarket once they establish process discipline. The HBM differentiation strategy at Samsung and SK Hynix is the defensive moat — but it needs to hold.