‘Korean markets are like small caps’, says Capitalmind Mutual Fund CEO Deepak Shenoy; Kospi jumps 5%

South Korea's stock market has become one of the world's most volatile equity markets over the past week, witnessing massive swings in both directions as investors grapple with changing sentiment around artificial intelligence (AI) stocks and fresh concerns over a proposed tax on unrealised gains.

Capitalmind founder Deepak Shenoy summed up the recent turbulence in a post on X, comparing the country's benchmark indices to small-cap stocks known for their sharp price swings.

“Korean markets are like smallcaps. Down 10% today. Up 10% another day. Crazy stuff. Apparently this time it's because the lawmakers are considering taxing unrealized gains. Imagine how much Samsungs founder family will have to pay!”

His remarks came as reports emerged that South Korean lawmakers are considering taxing unrealised gains—a proposal that has sparked concerns among investors over its potential impact on promoters, wealthy shareholders and long-term investors. If implemented, such a tax would require investors to pay tax on the increase in the value of their holdings even before those gains are realised through a sale.

The proposal has drawn particular attention because of the country's family-controlled conglomerates, or chaebols, where promoter families hold substantial stakes worth billions of dollars. Shenoy pointed to Samsung's founding family as an example, suggesting they could face a significant tax burden if unrealised gains were brought under the tax net.

South Korean Markets

The latest bout of volatility follows one of the most dramatic weeks for South Korean equities this year.

Earlier this week, the Kospi plunged 10%, with heavyweight technology stocks such as SK Hynix and Samsung Electronics leading the decline. The sharp sell-off reflected growing concerns that the AI-driven rally had run too far, prompting investors to question whether the trillions of dollars being invested in artificial intelligence would generate returns quickly enough.

Investor sentiment, however, reversed sharply on Thursday, rising 5%.

The turnaround was led by chipmakers after US memory giant Micron Technology issued a fourth-quarter revenue forecast of $50 billion, comfortably beating market expectations of around $43 billion. The stronger-than-expected outlook renewed confidence that demand linked to AI infrastructure remains robust despite recent concerns over elevated valuations.

Adding to the optimism, SK Hynix announced plans to raise $29 billion through a listing on the Nasdaq. The company said the proceeds would be used to expand semiconductor manufacturing capacity and invest in advanced chipmaking facilities, reinforcing investor confidence in the long-term AI growth story.

The rally in semiconductor stocks helped power a broad rebound in Seoul. SK Hynix surged 13%, while Samsung Electronics gained more than 5%, lifting the Kospi by more than 6% during Thursday's session.

Broader market sentiment also improved after oil prices fell below levels seen before the Iran conflict, as optimism surrounding US-Iran peace talks and increased shipping activity through the Strait of Hormuz eased concerns over energy supplies and inflation.

Even as AI optimism returned, Shenoy's remarks highlighted another source of uncertainty for investors. While earnings expectations continue to support technology stocks, proposed policy changes—including the possibility of taxing unrealised gains—have emerged as an additional risk factor capable of triggering sharp swings in one of Asia's best-performing equity markets.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.