South Korea’s stock market is taking a breather, with no near-term return to a ‘blazing rally’

Mok Dae-kyun remembers receiving a bullish call just one week before Lehman Brothers collapsed. In September 2008, a prominent analyst told him that share prices had already fallen enough. The numbers appeared to support the view because markets had rebounded, but Mok said he had underestimated the risk of a freeze in funding markets.

The experience shaped his approach to investing. Mok, a former fund manager with 20 years of experience, said investors should not outsource their thinking and should monitor economic variables beyond the stock market. He later managed to recover the principal of Mirae Asset Management’s battered Insight Fund after taking over in 2011, and now leads KCGI Asset Management, which manages assets worth more than 6 trillion won.

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The most important virtue in investing is never outsourcing your thinking, and keeping a close watch on various economic variables as well as the stock market.

Mok said a correct forecast can become the wrong position if an investor holds it for too long. He cited his experience during the European debt crisis, when he built a hedge after anticipating risks to the euro. The hedge generated strong returns during a sharp market fall in August 2011, but markets soon rebounded after central banks intervened. Mok said he failed to adjust and ultimately saw investors withdraw money from the fund.

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Even a correct forecast will eventually become the wrong position if you hold on to that view for too long.

He said stock prices usually reflect expectations about corporate fundamentals and future value, but can respond late when a major economic crisis approaches. Investors should therefore watch exchange rates, bonds and credit conditions, he said.

Mok sees warning signs in the current AI cycle. Large technology companies that once held substantial cash are issuing corporate bonds as investment spending rises. He expects big tech’s free cash flow to remain negative this year, next year and in 2028. Still, he said these companies have stronger balance sheets than many firms during the early-2000s technology bubble, and their valuations do not appear excessively unreasonable.

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When an economic crisis approaches, stock prices are the last to scream.

Mok said an “Armageddon” scenario for global markets appears unlikely based on current conditions. Any macroeconomic shock linked to AI would more likely produce a short-term correction of a normal scale. In South Korea, he said the AI cycle continues to support memory-chip companies, including Samsung Electronics and SK Hynix, although stock prices are currently pausing after last year’s gains.

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Looking only at the current situation, it is too early to discuss whether Armageddon will come to global markets, and it does not appear very likely.