BCA Research Downgrades South Korean Equities
BCA Research has revised its outlook on South Korean equities from overweight to neutral, arguing that the market now represents the most extreme expression of the global risk‑on rally. The KOSPI index has surged more than 50 % over the past three months, is up approximately 173 % over the last year, and has risen about 4.5 % in the past month, reflecting the strength of the recent rally that began after the Iran conflict.
The research notes that the rally is driven primarily by surging semiconductor and broader hardware technology stocks, buoyed by artificial‑intelligence optimism and strong semiconductor momentum. Retail investors have also aggressively shifted funds into domestic equities, further amplifying the price gains.
BCA highlights several late‑cycle warning signs: cash held on the sidelines in Korea, the United States, Japan and the euro area has fallen to historically low levels, indicating that investors have already deployed much of their capital into equities. Market breadth has weakened, and valuations are increasingly stretched. Only a small proportion of KOSPI‑listed stocks trade above their 200‑day moving average, showing that the rally is concentrated in a handful of large technology names, which makes the market particularly vulnerable to a correction.
The firm recommends that investors take profits on its long Asian semiconductor / short U.S. hyperscalers trade, which has generated roughly 140 % return since its initiation in November 2025. Despite the downgrade, BCA maintains a constructive view on the Korean won against the U.S. dollar and continues to favour Korean 10‑year government bonds, citing the country’s strong current‑account surplus and attractive bond yields.
Reporting by Roushni Nair.