[Edaily Reporter Park Sun-Yeop ] Global asset management firm Franklin Templeton assessed the Korean stock market as still one of the most attractive investment destinations in Asia, but noted that a strategy of simply tracking the index is no longer effective. Given the increasing concentration of investment in large-cap semiconductor stocks such as SamsungElectronics and SK hynix, the firm advises investors to select undervalued blue-chip stocks in sectors such as defense, shipbuilding, nuclear power, robotics, and power equipment.
In a commentary on investment strategies for the Korean stock market released on the 6th by Christie Tan, Global Investment Strategist at the Franklin Templeton Research Center, the firm stated, “The Korean stock market remains one of the most attractive equity investment destinations in Asia, but a strategy of simply buying the index no longer works.”

Tan assessed that the recent rally in the Korean stock market was driven by an AI-led semiconductor earnings cycle, political stability, and strong buying momentum from retail investors. However, she noted that the recent stock price correction and Korea’s retention in the MSCI Shinhung Index simultaneously highlighted the market’s upside potential and structural limitations.
He likened the current Korean stock market to one where “dazzling peacocks”—semiconductor companies—coexist with the “sleeping Korean tiger.” While the earnings outlook for semiconductor companies has improved dramatically due to expanding AI demand and the high-bandwidth memory (HBM) supercycle, he explained that investors should not lump SamsungElectronics(005930)and SK hynix(000660)together as identical AI beneficiaries. The assessment is that while SK hynix has solidified its leadership in HBM, SamsungElectronics still faces the challenge of closing the execution gap.
The problem is the concentration in the semiconductor sector. According to Franklin Templeton, SamsungElectronics and SK hynix currently account for approximately 53% of the KOSPI’s market capitalization. As of May, the return on the rest of the market—excluding these two stocks—was only about 5%, while the overall KOSPI index rose 29%. This suggests that upward momentum was concentrated in the semiconductor sector rather than reflecting a broad-based market rally.
Strategist Tan said, “There is a sleeping tiger right there,” adding, “Most Korean companies, overshadowed by the large-cap stocks driving the index, remain significantly undervalued.” He explained that about two-thirds of domestically listed companies are trading below book value, and about 41% have a price-to-book ratio (PBR) of 0.5 or lower.
He emphasized that investment opportunities are not limited to semiconductors. He cited defense, shipbuilding, nuclear power, robotics, and power equipment as sectors that could benefit from U.S. reindustrialization and expanded investment in global supply chains. His analysis suggests that these sectors serve as a channel to invest in Korea’s elevated geopolitical and industrial standing without relying solely on semiconductor momentum.
However, he noted that portfolio management has become even more critical given the recent market volatility. This is because, due to the impact of leveraged exchange-traded funds (ETFs) and derivatives on individual stocks, normal profit-taking selling can instantly turn into mechanical short-covering. Franklin Templeton assessed that the flow of leveraged funds among South Korean retail investors has gone beyond being a mere psychological indicator and has become a structural risk to the market.
Accordingly, the firm advised reducing the weighting of individual stocks and adopting a phased, staggered buying strategy. At the same time, it added that risk management standards should be strengthened and hedging measures put in place for semiconductor stocks that are seeing concentrated buying pressure.
Strategist Tan said, “The Korean stock market is still worth watching, but investment strategies need to change,” adding, “While we should selectively hold peacocks, now is the time to go out and find tigers.”