Markets
Korea's GDP Beat Forecasts and the Kospi Rose Over 3%
South Korea's economy grew 1.0% in the third quarter, beating the 0.7% forecast, as AI chip exports surged. The Kospi rose more than 3% on Tuesday and triggered a buy-side sidecar, while private consumption fell for the first time in nearly four years. SK Hynix reports on Wednesday with its first special dividend.
South Korea's chip boom showed up in the national accounts on Tuesday. The Bank of Korea's advance estimate put third-quarter growth at 1.0% on the quarter, above the 0.7% median of a Reuters poll and up from 0.6% in the second quarter, investingLive reported; on the year, growth was 3.4% against 3.0% expected. In August the central bank had forecast just 0.3% for the quarter. It now estimates that semiconductors account for about half of growth, and that the economy could grow about 3.7% this year if the fourth quarter matches the third.
The composition is lopsided. Exports rose 2.3%, led by chips, machinery and electrical equipment, and facilities investment jumped 4.1%, mostly chip-making equipment. Exports passed $800 billion in the first nine months and are on course to exceed $1 trillion for the year. Private consumption, by contrast, fell 0.2%, its first decline in nearly four years, which the report linked to the stock market slump and to car sales hit by strikes at automakers. Consumer sentiment also slipped in October. A country can grow fast on factory orders from AI data centres while its households feel poorer, and the third quarter was that.
Stocks had a second reason to rally. Anthropic's IPO filing in New York lifted the Philadelphia semiconductor index 2.82% on Monday, and the Kospi, which had closed at 5,469.47, its lowest since April 6, opened 3.46% higher at 5,658.65, Seoul Economic Daily reported. At 10:13 a.m. the Korea Exchange triggered a buy-side sidecar, a five-minute halt on program buy orders, after Kospi 200 futures stayed 5.05% higher at 893.02 for more than a minute. At 10:15 the index was up 4.25% at 5,702.02, with SK Hynix up 7.76% to 1,374,000 won and Samsung Electronics up 5.05% to 223,750 won, according to Digital Today. Foreign investors had bought a net 454.3 billion won and retail investors sold 751.9 billion. Yonhap had the index 3.9% higher at 5,682.6 at 11:20, and investingLive's regional wrap showed a 3.4% gain; Japan's Nikkei rose 1.7%.
The rebound starts from a deeply discounted level. On October 25 Goldman Sachs cut its 12-month Kospi target by 25% to 9,000 from 12,000, but said that still implies more than 60% upside. The index has fallen more than 35% from its June peak, trades at about four times forward earnings, the lowest across 18 major markets since 2006, and, by Goldman's estimate, prices in a 65% fall in chip earnings in 2027, which the bank considers far too pessimistic.
Wednesday will test that view. SK Hynix reports third-quarter results with an operating profit consensus of 76.964 trillion won, up 27% on the quarter, and plans to announce a shareholder return package including its first special dividend, Seoul Economic Daily reported. More than 50% of free cash flow is under consideration, plus about 20 trillion won from the sale of its Kioxia stake. Samsung Electronics follows on Thursday. The Bank of Korea held rates last week after raising them in July and September; Tuesday's numbers give it growth to justify more, and the fall in consumption gives it the main reason to wait.