Shinhan on the Kospi vs. Taiwan: "The key is how long the growth lasts and how predictable it is, more than how big the profits are."

Korea and Taiwan are both benefiting from the AI chip boom, but their stock markets have had very different Octobers.

The Kospi's 20-day realized volatility reached 52.7% as of October 28, about 2.5 times the 21.5% for Taiwan's Taiex, according to a Shinhan Securities report covered by Edaily (이데일리).

Realized volatility measures how much an index moved from day to day, expressed as an annual rate. We ran the same 20-session calculation using official daily closes and got about 53% for the Kospi and 22% for the Taiex, close to Shinhan's figures.

The daily moves show the difference. From October 1 through Friday's close, the Kospi rose or fell at least 3% in nine of its 20 sessions. The Taiex did it once in 19 sessions, a 3.41% drop on October 15, the day the Kospi fell 7.57%. On October 28, when SK Hynix reported, the Kospi jumped 6.63% and the Taiex rose 2.04%.

By our calculations, the Kospi was down 16.2% for October through Friday, October 30, and 37.1% below its June 22 record close of 9,114.55. The Taiex was down 5.7% for the month and 9.3% below its October 6 record of 49,822.55.

Korea's chip profits are growing faster than Taiwan's

SK Hynix (000660) reported third-quarter operating profit of 83.3 trillion won ($62.4B) on October 28, more than seven times what it earned a year earlier, with an operating margin of about 80%. Samsung Electronics (005930) estimated 107.4 trillion won ($80.5B) of quarterly operating profit on October 8, the first time a Korean company has passed 100 trillion won in a quarter.

TSMC (TSM) reported third-quarter net income of NT$763.06 billion on October 15, up 68.7% from a year earlier. Operating profit was NT$876.45 billion on revenue of NT$1,494.24 billion, a 58.7% margin. TSMC also gave that revenue as $46.72 billion, which works out to about 31.98 Taiwan dollars per US dollar. At that rate, TSMC's operating profit was about $27.4 billion, by our calculations, so SK Hynix ($62.4B) and Samsung ($80.5B) each reported more operating profit than TSMC in the quarter.

Forecasts in Shinhan's report have earnings per share for the Korean market rising 271.8% this year, against 75.8% for Taiwan. For 2027, the forecasts are much closer, at 33.3% for Korea and 31.2% for Taiwan.

Shinhan says the difference is how predictable the profits are

Shin Seung-woong (신승웅), the Shinhan analyst behind the report, argues that the two markets earn a different kind of profit. "Korea is weighted toward memory chips, and Taiwan toward advanced foundry led by TSMC," he wrote. "Memory has structural growth, but there's still a debate over the industry cycle. Advanced foundry has a relatively stable profit structure, built on the high technical barriers of leading-edge manufacturing and its customer base."

His summary: "The key is how long the growth lasts and how predictable it is, more than how big the profits are."

Analyst forecasts show that split. The LSEG consensus cited by Edaily has SK Hynix's quarterly operating profit peaking at 118.4 trillion won ($88.7B) in the fourth quarter of 2027, then falling to 104.7 trillion won ($78.5B) a year later, with the margin slipping to 68.7%. TSMC's is expected to keep growing in 2028, from about 50 trillion won ($37.5B) in the first quarter to 66.4 trillion won ($49.8B) in the fourth, with margins around 60%.

The forecasts for SK Hynix are also far more spread out. Among global investment banks' estimates of 2028 operating profit, the coefficient of variation, which is the standard deviation of the estimates divided by their average, was 25.3% for SK Hynix and 10.1% for TSMC. In plain terms, analysts disagree about SK Hynix's 2028 profit about 2.5 times as much as they do about TSMC's.

The direction of estimates differs as well. Over the past three months, forecasts for Taiwan's earnings over the next 12 months rose 18.1%, against 12.7% for Korea. Taiwan's earnings revision ratio, which compares companies getting estimate upgrades with those getting downgrades, was 19.8%, the highest among major markets. Korea's was minus 12.4%.

Taiwan's market is heavily tied to AI, too

Seven of the 10 biggest companies in the Taiex are AI-related, and TSMC alone makes up 41.1% of the index.

So both markets are concentrated bets on AI chips. In Shinhan's reading, the difference is the kind of chip.

I think leverage made the Korean swings worse, too, and that's not in Shinhan's report. Forced sales of stock bought on unpaid settlement amounts totaled 286.2 billion won ($214M) over four sessions from October 13 to 16, Seoul Economic Daily (서울경제) reported.

Shinhan ties Korea's low P/E to that uncertainty

The Taiex trades at 16.2 times its expected earnings for the next 12 months, close to its five-year average, according to the report. The Korean market trades at 4.5 times. Shinhan says that discount reflects doubts about how long Korean profits can last.

"The stock market puts a premium not only on high profitability but on how durable and predictable earnings are," Shin wrote. "If the AI cycle speeds up again, Korea could lead on the way up. But weighing returns and stability together, Taiwan's market is also an attractive alternative."

Put all of that together, and the gap isn't about who's making more money this year. Korea's chipmakers are earning more and growing faster. The market just isn't sure what they look like in 2028. I'll be watching whether estimates for SK Hynix narrow and Korea's revision ratio improves. For now, I expect the Kospi to keep moving more than Taiwan in both directions. Bloomberg reported earlier this month that some global funds now prefer Taiwan for AI exposure.

The analyst comments are translated from Korean. Won figures are converted at 1,334.6 won to the dollar, the Naver Finance rate on October 30, 2026.