This article first appeared in The Edge Malaysia Weekly on June 29, 2026 - July 5, 2026

FORMER US Federal Reserve chairman Alan Greenspan, who led the American central bank for 19 years, passed away last week. Greenspan leaves behind a chequered legacy because many blame him for the subprime housing loans crash that triggered the 2008 global financial crisis. He is best remembered for his 1996 dinner speech at the American Enterprise Institute in Washington DC where he warned of “irrational exuberance” that “could lead to unexpected and prolonged contractions as they have in Japan”. As Greenspan was speaking, the Tokyo stock market had just opened. Within minutes, it was down 5%, though it recovered to close at just over 3% lower for the day.

South Korean officials have sounded Greenspan-like warnings for retail investors in recent weeks. Over the past 18 months, the Seoul bourse has nearly quadrupled. As I wrote in my column “How the AI boom is creating memory chip shortages” in February, the Asian market benefiting the most from the artificial intelligence or AI boom is South Korea, home to two of the three global memory chip giants, SK Hynix and Samsung Electronics, which along with US-based Micron control 94% of the memory chip market. Though they are both valued at around US$1.35 trillion (RM5.55 trillion) each, SK Hynix is a bigger beneficiary because it is a pure-play memory player and the leader in HBM, or high-bandwidth memory, used in data centres with AI chips made by Nvidia and others. Samsung Electronics, on the hand, also makes smartphones and other consumer electronics, and runs a chip foundry besides making memory chips.

As AI moved from training large language models to inferencing and reasoning over the past two years, demand for HBM chips grew, which in turn created shortages not only of AI-focused chips but also a range of other memory chips that are used in smartphones, PCs, electric vehicles and a range of consumer electronics. Since memory producers carry high operating leverage, price gains translate into outsized bottom-line growth. Memory chip firms that once had gross margins of around 25% now have margins of over 80%.

Moreover, memory chip makers’ shift to three- to five-year long-term supply agreements will likely keep profitability elevated for longer than the market is currently pricing. Korean memory stocks still trade at single-digit price-earnings multiples — a level that suggests earnings sustainability is not yet reflected in stock prices.

SK Hynix and Samsung Electronics now make up 56% of Korea’s benchmark Kospi index. The Kospi is up 292% since the start of last year, while shares of Samsung Electronics are 410% higher and those of SK Hynix are up a whopping 1,460%. Compare South Korea’s spectacular rally with the Southeast Asian bull run in 1993. The Kuala Lumpur Composite Index was up 98.04% and Singapore’s Straits Times Index rose 59% that year. The rally in Seoul this past year is vastly bigger in size and scale. While the Southeast Asian bubble burst quickly in early 1994, Korean chip makers are still trying to keep up with burgeoning demand, which in turn is pushing up chip prices and fattening the companies’ bottom lines, prompting retail investors to load up more on the stocks.

For Koreans, the recent market rally has been a once-in-a-lifetime experience. I worked in Seoul as a financial journalist for three years and still visit the city regularly to meet friends and former colleagues. It took nearly 19 years since the Seoul bourse began trading in 1956 for the Kospi to rise from 1,000 to 2,000 points, and another 13 years to reach 3,000. For the 38 years since, the market hasn’t gone up much. Indeed, it has mostly gone sideways or down. The recent jump from 4,000 to 9,000 points took just eight months.

Goldman Sachs’ Asia strategist Timothy Moe in a report last month noted that South Korea was the firm’s “highest-conviction market in the region. Our forecast of earnings growth this year at 300% is the strongest for any market in Asia ever, with the exception of the 1999 recovery from the Asian financial crisis, when many economies and profits were initially devastated”.

Not surprisingly, Koreans are flocking to the market and buying stocks hand over fist. Everyone in the greater Seoul area, where about half of South Koreans live, seems to be trading stocks these days. If you walk around Gwanghwamun, the downtown business district, or the shopping, business and entertainment district Gangnam south of the Han river, you will find Koreans, young and old, fiercely typing market orders on their smartphones. Nearly 60% of adult Koreans now own stocks, compared with over 62% ownership of stocks in the US and 34% in the UK. Over the past year, 20 million new brokerage accounts have been opened in the country. Average daily volumes on the Korea Exchange, or KRX, have more than doubled during this period. Daily retail trading volumes are up 220% since January. Margin-based investment by retail traders was up 72.5% last year and has more than doubled this year. Seoul also has one of the most active futures and options markets in Asia. Exchange-traded funds or ETFs make up a third of trading volumes on KRX and options on single-share leveraged ETFs are among the most heavily traded. South Korea is now the world’s sixth largest market, behind the US, China, Japan, Hong Kong and Taiwan.

The boom is a remarkable turnaround for the Seoul bourse, which had long been written off by investors as a laggard compared with its global peers. Although it is home to household names such as Samsung Electronics and Hyundai, South Korea was for decades infamous for the “Korea discount”, a label used to describe the usually low valuations of firms because of meagre shareholder returns, weak corporate governance under the country’s family-run chaebol (conglomerates), such as Samsung Electronics, Hyundai and LG, which use complex cross-shareholding structures to maintain control while owning relatively small stakes, and making low dividend payouts and stock buybacks. That bred a culture of short-term trading and unnecessary volatility.

South Korean President Lee Jae Myung, who assumed office last year, has pushed a series of stock market reforms begun under his predecessor three years ago. They include the Corporate Value-up Program, modelled loosely on similar reforms in Japan, to encourage listed firms to improve return on equity, increase dividends, buy back shares and disclose plans for improving valuations. Lee has said he wants more people to invest in stocks to wean the country off its traditional attachment to real estate, moving more money into productive assets.

South Korea’s economic transformation since 1945 is one of the most dramatic development stories in modern history — a country that went from war-ravaged poverty to high-income industrial powerhouse in two generations. It is now the 12th largest economy on earth.

By the late 1990s, chaebol such as Hyundai, Samsung and LG had grown into sprawling, highly leveraged conglomerates with enormous political influence, and financial liberalisation in the early 1990s allowed them and local banks to borrow heavily in foreign currencies at short maturities — a dangerous structural vulnerability. In the wake of the 1997 Asian financial crisis, the country secured a US$58 billion bailout from the International Monetary Fund. The crisis forced sweeping structural reforms, including financial sector restructuring, improved corporate governance, greater transparency and the break-up of several large chaebol. Many, like the fourth-ranking Daewoo, collapsed. Hyundai’s and LG’s semiconductor arms were bailed out by Korean banks, merged into a single entity called Hynix, and later sold to petrochemical giant Sunkyong group, which renamed it SK Hynix. Now it is the largest listed firm in the country and the 11th largest in the world.

Since the Asian financial crisis, South Korea has remade itself into a soft powerhouse. Its TV dramas are now global exports. In 2012, pop singer Psy (real name Park Jae-Sung) burst onto the scene with Gangnam Style, with his signature galloping dance. The song, viewed over six billion times on YouTube, helped unleash Hallyu, or the Korean Wave of entertainment. Psy and the rise of social media turned the K-pop genre, with its positive and uplifting messages, into a global phenomenon through the clever use of technology, including virtual concerts as well as the integration of augmented reality. Not long after Gangnam Style became a hit, boyband BTS arrived on the scene with their debut album 2 Cool 4 Skool, captivating audiences around the world.

Korea’s booming cosmetics industry has become one of the country’s most recognisable cultural and economic exports. The industry has two planks: at the top are large brand owners such as Amorepacific, which owns Sulwhasoo, Laneige, Innisfree, Etude House and Hera, and LG Household & Health Care, which owns The History of Whoo, O Hui, SU:M37 and belif. The other plank is control of the cosmetic supply chain. Listed firms such as Cosmax and Kolmar Korea supply ingredients to cosmetic brands in Japan, China, Europe and the US.

Another burgeoning growth engine is the country’s defence industry. South Korea is now the world’s eighth largest supplier of arms and ammunition, accounting for 3.5% of global defence exports. Hanwha Aerospace produces the K9 Thunder self-propelled howitzer, armoured vehicles and missile systems. Korea Aerospace Industries (KAI) makes the T-50 trainer family and the FA-50 light combat aircraft, and is developing the KF-21 Boramae — a domestically designed 4.5-generation fighter jet. Hyundai Rotem produces the K2 Black Panther main battle tank, considered one of the most capable in the world. LIG Nex1, which recently changed its name to LIG Defense & Aerospace, manufactures a range of missile and radar systems. Hyundai Heavy Industries’ and Hanwha Ocean’s shipyards make surface combatants and submarines. South Korean defence contractors are emerging as big suppliers to Europe, where Nato nations are in the process of increasing their defence budgets from 1% to 2% of their GDP to 5% of GDP. Most of the defence suppliers are listed firms; as such, foreign and local investors can partake in their growth.

On June 23, Kospi suffered a “Black Tuesday”, with the index plunging 10%, fuelled by a warning from regulators to retail investors against toxic leveraged single-stock ETFs. But earnings are growing so strongly that investors chased stocks upwards again over the next several days.

So, is South Korea’s fascination with stocks just irrational exuberance? If it is, what lessons can one draw from Greenspan’s warning? Should exuberant Korean investors just come to their senses, sell everything and wait for the next market bottom? Here’s the thing: between Greenspan’s speech on Dec 5, 1996, and the dotcom bubble peak in March 2000, the Nasdaq Composite Index surged by over 274%, while the broader S&P 500 more than doubled, or gained nearly 106%. Let’s say you had a million bucks in the S&P 500 Index ETF at the end of 1996. Your portfolio would have gone from US$1 million to over US$2.4 million if you included S&P returns and reinvested dividends. If, however, you sold after the Greenspan speech, you were down 60% when the bubble finally burst in March 2000. Of course, the market then fell even further. Greenspan followers would have been down nearly 80% by end-September 2001. However, if you ignored the then Fed chief and stayed invested, your portfolio would have gone to US$2.4 million, then lost 35% or so — as such still 56% up since the speech.

What’s my point? South Korean investors may be a little exuberant but are fairly rational. The benchmark Kospi trades at just under eight times this year’s earnings, a level Goldman Sachs considers inexpensive on both price-earnings and price-to-book versus return on equity basis. The investment bank expects the Kospi to surge to 12,000 over the next 12 months, or a 34% upside.

On June 24, SK Hynix announced plans to raise US$29 billion through a secondary share issue as part of its American Depositary Receipts or ADRs listing. That means 2.7% of its shares will now be listed in the US to allow more American retail investors to buy them. Taiwan Semiconductor Manufacturing Co (TSMC), a widely held stock among tech investors, has 21% of its shares traded as ADRs in the US. The US$29 billion worth of shares will enlarge SK Hynix’s float and give it a bigger cash load to build massive plants at home and a US$4 billion chip packaging plant in the US state of Indiana. It will also attract more foreign retail investors to the Seoul bourse.

Assif Shameen is a technology and business investor based in North America

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.