Matthew Turtle, CEO of Turtle Capital Management (TCM), stated that South Korea is a key market for technological innovation in Asia, particularly with major players like Samsung and SK Hynix. In an interview with Aju Economy on September 13, he emphasized that for the KOSPI to recover its long-term upward trend beyond 10,000 points, the government should trust the market and investors rather than excessively intervene.
Turtle, who founded TCM in 2012 and manages approximately $5 billion, described the firm as a unique player on Wall Street. He noted that South Korea has become the third most important market for global investors, following the U.S. and China.
He remarked, "Global interest in South Korean stocks is high, as evidenced by the explosive inflow of funds into U.S. DRAM ETFs, which are heavily weighted in Samsung Electronics and SK Hynix. However, considering macroeconomic variables, achieving a KOSPI of 10,000 points next year is unlikely, but it could be possible by 2028."
Turtle predicted that macroeconomic factors will be the biggest influence on the stock market over the next year. He identified risks such as prolonged reflation, instability in the Middle East, unwinding of yen carry trades, and interest rate hikes as potential threats. He cautioned against the long-term dollar weakness resulting from excessive U.S. fiscal spending and bond issuance.
He elaborated, "The U.S. government has mismanaged its finances for a long time. Due to excessive spending and bond issuance, a significant portion of GDP is consumed by interest payments, making long-term dollar weakness inevitable."
Regarding investment strategies for the second half of the year, Turtle expressed a preference for alternative assets like gold and Bitcoin over dollar-denominated assets. He advised diversifying investments into 'HALO' value stocks—those in sectors like mining, utilities, and railroads—that are irreplaceable by AI, while being cautious of concentration in specific large-cap stocks.
Focusing on K-Semiconductor ETFs
When asked about investment options in the Korean market, Turtle highlighted memory semiconductor ETFs with significant allocations to Samsung Electronics and SK Hynix. He stated, "Given the potential long-term weakness of dollar assets, there is no need to convert won to dollars. It is advantageous to include won-based assets in a diversified portfolio, along with alternative assets like gold and Bitcoin."
He cited the success of a memory semiconductor ETF listed in the U.S. as a prime example. This ETF, which allocated about half of its positions to South Korean companies like Samsung and SK Hynix, surpassed $10 billion in assets within a month of its launch, marking one of the fastest fund-raising successes in ETF history.
Turtle explained, "Global investors are not just interested in the semiconductor sector; they can easily access key South Korean assets like Samsung and SK Hynix through U.S.-listed ETFs. This demonstrates the high level of interest from global capital in South Korea as a center for technological innovation."
He also commented on the MSCI inclusion issue, stating, "As more ETFs containing South Korean stocks are established and gain traction in U.S. and other foreign markets, the resulting capital inflow will be significant, comparable to MSCI inclusion effects."
KOSPI 10,000? Likely by 2028, but watch for macro headwinds next year
Regarding the possibility of the KOSPI reaching 10,000, as suggested by major foreign investment banks like Nomura, Turtle agreed with the direction but emphasized caution regarding the timing. He stated, "While achieving 10,000 is possible, it is unlikely to happen next year. Considering the macro environment, the most likely timeframe is 2028."
The reason for his caution about next year's market is the complex macro risks. He noted that reflation could last longer than expected, and if inflation pressures rise again due to prolonged instability in the Middle East, the Federal Reserve's ability to lower interest rates could be compromised.
Additionally, he pointed out that movements to unwind yen carry trades in Japan and potential selling of U.S. Treasuries could lead to rising Treasury yields, which would first impact technology-focused markets.
Turtle also expressed a negative outlook on bond investments in the long term, citing global debt levels and inflation as concerns that could hinder bonds' hedging capabilities. He stated, "Under current conditions, bonds are not a suitable investment. Given the ongoing trend of rising interest rates due to inflation, bond investment will only be appropriate when rates rise significantly higher than they are now."
Single Stock Leverage Regulation: Leave it to Investor Choice
On the topic of proposed regulations for single-stock leverage products, Turtle disagreed with claims that single-stock leveraged ETFs have increased market volatility. He stated, "Popular stocks that attract investor interest are inherently volatile. Even without leveraged ETFs, investors could have used options or futures to invest in those stocks." He emphasized the need for government education on investment structures and risks to protect investors.
Turtle noted that capital markets in the U.S. and Europe have varying guidelines and restrictions. He explained, "In the U.S., single-stock leverage is allowed, but there are guidelines advising ETF managers against launching additional 3x leveraged ETFs, while Europe freely trades individual stocks with 3x or 5x leverage."
He cited examples of investors seeking 3x leverage trading moving to European markets through U.S. brokerages, stating, "Government intervention does not always yield positive results. The U.S. government has faced limitations with each intervention, and price determination and product selection should be left to market autonomy and investor judgment."
Branding K-Stock CEOs
Finally, Turtle urged a cultural shift among South Korean corporate executives to spread the warmth of the Korean stock market from large-cap to mid- and small-cap stocks and to overcome the Korea discount. He remarked, "In the U.S., CEOs of major companies are often more well-known than the companies themselves. Investors buy stocks based on the vision of leaders like Jensen Huang of NVIDIA or Elon Musk of Tesla. The same applies to Lisa Su of AMD and Jeff Bezos of Amazon."
Matthew Turtle concluded, "Korean corporate executives must actively promote their companies' future visions and engage in 'CEO marketing' like Jensen Huang to spread the warmth of the capital market."
* This article has been translated by AI.
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