Japanese and Korean Markets Rise Despite Geopolitics
The Japanese Nikkei 225 index opened up 0.78% amid a weaker yen, while South Korea's KOSPI surged 3.70%, showing a confident recovery. The rally in Seoul was supported by strong performance in the semiconductor sector, particularly SK Hynix.
A Three-Stage Rocket: Why KOSPI and Nikkei Are Rising While the World Is on Fire
Morning of May 11, 2026. The Strait of Hormuz is virtually blocked. Brent crude is above $104 per barrel. Trump has just called Iran's peace proposal "TOTALLY UNACCEPTABLE." US premarket is in the red. And at that very moment, the KOSPI surges 4.86%, breaking through 7,800 points for the first time in history, while the Nikkei 225 touches an intraday record of 63,385 points.
An outside observer would say: "madness, detached from reality." A professional would see: a perfect storm of three independent forces—a cheap yen, institutional rebalancing, and the AI supercycle—converging at a single point. And that point is May 11, 2026.
What Is Really Happening
There is no such thing as "rising despite." The market never moves despite; it always moves according to—it's just that the logic of that movement is not always obvious.
Look at the difference in reactions. America is falling, while Asia, especially Korea and Japan, is rising. The reason is not geopolitics per se, but where geopolitics hits supply chains. The Hormuz crisis kills oil supply—this hurts energy-importing countries with a high share of industrial consumption. The US, the world's largest oil producer, also suffers, but differently: through inflation expectations and higher fuel costs for consumers.
And Korea and Japan? They import oil, yes. But their stock indices are 40-50% composed of technology and semiconductor companies whose products are needed for AI. And AI capital expenditure for 2026 is planned at $655 billion. That's five times the annual budget of Saudi Arabia. And this capex won't stop because of Iran. It doesn't correlate with oil at all. It correlates with only one thing: the race for AGI.
Here's what happened on May 11: the market hit the "reassessment" button. Capital that once viewed geopolitics as a universal risk has now learned to discriminate. An oil shock is bad for airlines, bad for the consumer sector, bad for global logistics. But for manufacturers of HBM memory, which Nvidia needs for the next-generation Blackwell? That's not a risk; it's confirmation of structural demand.
Timeline and Context
The chain of events leading to today's surge began forming as early as Friday.
May 8, New York. The Philadelphia Semiconductor Index surges 5.5%. The DRAM ETF, in which Samsung and SK Hynix have a significant weight, closes up over 13%. The Nasdaq Composite hits a new all-time high. American money had already voted for memory on Friday.
May 8, evening in Europe. Frankfurt Stock Exchange: SK Hynix GDRs surge 16.27% to €1,065. London: Samsung GDRs rise 6.54%. While Asian markets were closed, their key stocks were already being revalued in the West.
May 10, Sunday. Trump posts on Truth Social: "TOTALLY UNACCEPTABLE." Iran's peace proposal, which included lifting sanctions and a ceasefire on all fronts, is rejected. Oil moves above $100. By morning, any news feed looks frightening.
May 11, 4:30 AM ET. US premarket is flashing red. Tech giants are losing 0.3-0.7%. A feeling creeps in that Monday will be tough.
May 11, 9:00 AM KST. The KOSPI opens with a gap up of 3.7%, breaking through 7,775 points from the first minute. By 9:30 AM, the index is already above 7,820, triggering a buy-side circuit breaker—a temporary halt in program trading due to overly aggressive buying. Samsung rises 6.7% to 287,000 won, SK Hynix up 11.2% to 1,870,000 won.
May 11, 9:20 AM JST. The Nikkei 225 opens 0.98% higher, touching 63,385 points—a new intraday record. But by the close, the index slips into negative territory at -0.36% due to profit-taking as it approached 63,000.
Key detail: the Japanese market, unlike the Korean one, did not hold its morning gains. Why—I'll explain later.
Who Wins and Who Loses
The day's biggest beneficiary: SK Hynix. The stock closed up 11.2% not on speculation, but on concrete numbers. On the morning of May 11, Kiwoom Securities raised its target for SK Hynix from 1,300,000 to 1,900,000 won, revising its Q2 operating profit forecast to 70 trillion won. The reason: rising prices for general-purpose memory are exceeding expectations. The HBM supply shortage is intensifying, and new production lines won't come online until after 2028. This means 2026 and 2027 will be a "golden window" for Korean memory makers—demand is guaranteed, competition is limited.
Samsung Electronics is beneficiary number two, though less flashy. KB Securities raised its Q2 2026 operating profit forecast for Samsung to 84 trillion won. To put that in perspective: that's about $57 billion, or nearly double Tesla's entire quarterly revenue. Samsung is up 6.9%, and that's not the limit.
Kioxia Holdings is a Japanese beneficiary that Western media ignore. The company's market capitalization has surged to 24.2 trillion yen, 30 times its IPO price in December 2024. From 43rd place by market cap in Japan, Kioxia has risen to 5th, overtaking Hitachi and Keyence. Rising NAND flash prices, fueled by AI demand, are radically rewriting profit forecasts.
Japanese banks are hidden beneficiaries. For the first time in nearly 20 years, all three megabanks (Mitsubishi UFJ, Sumitomo Mitsui, Mizuho) each have a market cap above 10 trillion yen. After decades of deflation, rising interest rates have become not a headache but a driver of profitability.
Losers: Japanese automakers. Those that dominated the list of the country's largest companies ten years ago are now losing ground. Toyota is losing market cap relative to the AI sector. A structural shift that Nikkei writes about as a fait accompli: cars are out, semiconductors and banks are in.
Loser #2: retail investors who panicked. The Nikkei opened higher, touched a record, and then retreated to close down 0.36%. Those who bought at the open on news of the record are sitting on losses by evening. This is a classic trap for those who don't understand the difference between a structural trend (AI, memory) and a cyclical catalyst (yen weakening).
What the Media Aren't Saying
Insight one: the Korean rally is not about Korea, but about a global revaluation of memory. What we see on May 11 is a gap closing. While the KOSPI slept over the weekend, US and European traders had already revalued Samsung and SK Hynix via GDRs and ETFs. SK Hynix GDRs rose 16% in Frankfurt, Samsung GDRs 6.5% in London. The morning surge in the KOSPI is simply a mechanical catch-up of local quotes to what had already happened in the West. Had there been no Hormuz, the same rally would have occurred, because the source of the move is not in Tehran, but in Santa Clara, where Nvidia is planning its next tranche of HBM purchases.
Insight two: the Japanese market isn't falling—it's digesting a change of leaders. The Nikkei closed down 0.36%, but that's not a bearish signal; it's technical profit-taking after touching an all-time high. The true story of the Japanese market on May 11 is not the index, but rotation: capital is moving out of autos and telecoms into semiconductors and banks. Four of Japan's ten largest companies are now AI and semiconductor names (Kioxia, SoftBank, Tokyo Electron, Advantest). This shift reflects Japan's final exit from a 30-year deflationary spiral.
Insight three: the "Korea Discount" is dying. The term "Korea Discount" referred to the chronic undervaluation of Korean stocks relative to global peers due to chaebol opacity and weak corporate governance. In 2026, the government's Corporate Value-Up program—mandatory buybacks and dividends—is changing the game. Foreign capital is flowing into Seoul at a rate of about $1.2 billion per week. Goldman Sachs has raised its 12-month target for the KOSPI to 9,000 points, JP Morgan to 10,000, and Hyundai Motor Securities sees 12,000. These are not forecasts; they are a structural revaluation of an entire national market.
Insight four: the buy-side circuit breaker is a red flag, not a reason for celebration. When KOSPI 200 futures rose 5%, the exchange halted program trading for five minutes. This has happened before in 2026. The regulator, the same FSS that today warned of margin trading risks, sees that the market is overheated. Circuit breakers tripping is a symptom of elevated volatility, not health.
Forecast: Next 30 and 90 Days
30-day horizon, to mid-June 2026.
The KOSPI will likely test 8,000-8,200 points. Drivers: the release of April CPI (if it doesn't show core inflation accelerating, fears about the Fed will ease), the Trump-Xi summit (if no new chip export restrictions), and the release of Samsung and SK Hynix Q2 reports in June. I expect both giants to beat consensus, as current forecasts (84 trillion and 70 trillion won respectively) still lag behind memory price dynamics.
But there is a risk. On May 22, leveraged single-stock ETFs on Samsung and SK Hynix launch on the KOSPI. If retail investors pile into these leveraged instruments (and they will), volatility will multiply. A scenario is possible where good quarterly reports trigger not a rally but a "sell the news" event, because the market has already priced in super results.
The Nikkei on a 30-day horizon could test 64,000-65,000 points. A weaker yen to 157 per dollar provides a tailwind for exporters. Sony's partnership with TSMC on image sensors for physical AI is a structural catalyst that will unfold over years. The agreement was signed as a non-binding MoU, but the market is already betting the deal will go through.
90-day horizon, to August 2026.
The key question: how long can the KOSPI rally continue without a correction? The index has risen 75% since the start of the year. Even though the rally is backed by fundamentals (profits have indeed soared), such a pace is unsustainable. I expect at least one 10-15% correction in July-August. The trigger could be anything: profit-taking by foreign funds, a new round of escalation in the Middle East, hawkish rhetoric from new Fed Chair Kevin Warsh.
But any such drop will be bought. Why? Because the HBM memory shortage won't disappear before 2028. Because Samsung and SK Hynix are not optional players in the AI chain but irreplaceable monopolists. Because Corporate Value-Up will continue to attract foreign capital. And because Goldman, JP Morgan, and Hyundai Motor Securities aren't done raising targets yet.
For the Nikkei, the scenario is similar but less dramatic. The market is more diversified; the AI sector makes up a smaller share of the index. A weaker yen is a double-edged sword: it helps exporters but pressures the consumer sector. I expect a smoother rise for the Japanese market, with several episodes of intraday records and profit-taking similar to what we saw on May 11.
The main takeaway from the morning of May 11: geopolitics is no longer a universal risk factor. The market has learned to discriminate. The Hormuz crisis hits some sectors—and simultaneously strengthens others. Investors who understand this make money. Those who only see headlines about war lose out.
— Editorial Team
