Market Review 29th June 2026

Everything you need to know, Simplified!

The AI reality check: a warning from Korea's rally

Summary

• The Bloomberg Korea Large & Mid Cap index surged over 422% at its peak from the April 2025 tariff-related low, driven almost entirely by Samsung and SK Hynix, which together accounted for 75% of the index

• The rally left valuations looking increasingly stretched, with Korea representing the clearest example of where the AI trade has gone too far - the index fell 7% last week

• Korea's 14 million retail investors, known locally as ‘ants’, have fuelled market volatility through the rapid adoption of single-stock leveraged Exchange Traded Funds (ETF) – a fund that is designed to track the performance of just one company, rather than a pool of investments – with recent price moves prompting the regulator to acknowledge concerns over approving these products

• Last week saw a sharp unwind, with SK Hynix falling 17% mid-week and the Korean exchange halting trade after the market dropped 9% at Friday's open

• The broader 'June Swoon' in global tech reflects two forces: inflation fears and positioning

• US Producer Price Index (PPI) - measures the average change in prices over time that producers receive for their goods and services - is running at 6.5%

• Apple and Microsoft both raised prices last week citing an AI-driven memory chip shortage and personal consumption expenditure (PCE) inflation accelerated

• Changes in PPI reinforce fears that the Chair of the US Federal Reserve, Kevin Warsh, could deliver a more material hawkish recalibration where higher interest rates are favoured to keep inflation under control

• The AI ecosystem's durability hinges on end-user demand meeting forecasts

• Revenue projections for leading AI companies appear optimistic but not unrealistic; the mathematics becomes considerably easier if compute costs fall, which may define the next wave of the build-out.

---

Market Review

Korea has an ant problem

For the most part, the strong performance across equity markets - and particularly in technology hardware and semiconductor manufacturing - has been driven by fundamental earnings strength rather than purely irrational exuberance, although there are certainly pockets of that. This week we focus on the clearest example of where the AI rally has gone too far: Korea. In local currency terms, the Bloomberg Korea Large & Mid Cap index has risen by over 422% (at the peak) since the April tariff-related sell-off low last year. For years before then the market had stagnated - in fact, for the four years from 9 April 2021 to 9 April 2025 the index delivered a return of -26%.

Two technology stocks have driven the market higher: Samsung and SK Hynix, both manufacturers of semiconductors that have seen demand skyrocket. SK Hynix shares peaked earlier this month having risen over 1,700% since 9 April last year. Samsung has delivered a still impressive 600% return over the same period. The two companies have become so dominant that at the start of this week they composed 75% of the Korean equity index.

South Korean retail traders, widely known locally as ‘ants’, number over 14 million individual investors and now represent about a third of the country's daily stock trading volume, significantly influencing the market. They have recently driven unprecedented retail rallies through leveraged bets on artificial intelligence and tech.

Single-stock leveraged ETFs - allowing investors to receive 2x the stock return for individual companies such as SK Hynix - have become incredibly popular with ants since being approved by the regulator only two months ago. This has created massive volatility, with daily moves of over ±10% for the two behemoths becoming the norm.

The SK Hynix leveraged ETF alone has swelled to US$10bn, while at the end of May sixteen similar leveraged single-stock products linked to chipmakers were launched in Korea. This month, weakness across global technology stocks has simultaneously caused liquidity to break down in such products, resulting in huge divergences between product performance and the underlying stock return. Earlier this month, even as SK Hynix jumped 16%, the KIM ACE SK Hynix Single Stock Leverage ETF dropped 27%. The Korean regulator is becoming increasingly concerned by the impact such instruments are having on the market, with the watchdog announcing its regret at having approved them.

Last week was particularly volatile, with Hynix stock down 17% in a little over a session mid-week, before the week ended with trading being halted on the Korean stock exchange after the market fell 9% shortly after the open on Friday.

While there are other areas of froth in the market, few are as clear as the ant frenzy in South Korea, which does not reflect the earnings-driven rally seen in April and May. That said, some of this froth coming out after such a strong prior rally is a healthy reset - and the broader June weakness across global equity markets reflects a similar dynamic, with positioning and inflation fears now driving the narrative.

The ‘June swoon’

Equity markets have weakened in June, with technology stocks bearing the brunt. Two factors are driving the 'June Swoon': positioning and inflation fears.

Inflation fears: The US economy is showing signs of heating up, with manufacturing activity at a 49-month high, the labour market tightening, and the economic surprise index spiking. Inflationary pressures appear to be building too, particularly related to the AI build-out. PPI inflation is running at 6.5% in the US, with electronic manufacturing components well into double digits. It is clear that the AI build-out is putting upward pressure on prices - we saw this anecdotally last week with Apple raising prices across its Mac, iPad, home devices and Vision Pro lines - its most extensive price action in years - directly citing an unprecedented shortage of memory chips driven by the AI boom. Microsoft moved in lockstep, raising Xbox prices within hours of Apple's announcement, with both companies warning the crunch and its impact on consumer prices will not end anytime soon. There has been a hawkish pivot at the Fed and, with Kevin Warsh at the helm, there are fears that this 'price stability pragmatist' could oversee a more material hawkish recalibration - hiking rates further to address the fact that inflation has been above target for over five years, as evidenced last week by the acceleration in PCE inflation. The most concerning pattern is the reassertion of 2022's dynamic, where the market reacts negatively to strong economic data as it is taken as further evidence of overheat.

Positioning: It is healthy for equities to correct after a period of strong performance - an opportunity for some of the hot air to escape and positioning to normalise, better reflecting fundamentals. As we digest the AI cycle, we note how its success hinges on one thing: end-user demand. The price and demand AI companies receive for their services needs to meet forecasts in order for them to honour their commitments to the hyperscalers for compute. The hyperscaler data centre build-out is backed by the revenues of AI companies, and further down the supply chain, the companies benefitting from hyperscaler capital expenditure are themselves reliant on the hyperscalers. The AI ecosystem falls apart if expected end-user demand for AI/LLM products does not materialise, or if prices for their offerings fall sharply below expectations. Having reviewed the revenue forecasts for the leading AI companies, they appear optimistic but not necessarily unrealistic. The mathematics becomes much easier if compute costs fall and perhaps the next wave of the AI build out will be focussed on improving the efficiency of compute.

---

The week ahead

US employment report

We expect June's job report, due on Thursday, to show that 200k jobs were added to the US economy (vs. 172k prior). That would be a third straight extremely strong print, with the three-month average job increase likely clocking in at 183k. For the Fed, the more important number is the unemployment rate which is anticipated to round to 4.3% - same as May - with a risk of rounding to 4.2%. Nonetheless, with June's pace of job gains significantly exceeding the Fed's estimated near-zero unemployment breakeven, we expect the report to fuel bets of imminent rate hikes. 

Euro area inflation

As the European Central Bank mulls over whether to hike again, the inflation report for June, due Wednesday, will be closely watched by the markets to fine tune their expectations for the monetary policy outlook. While still above the 2% target, Consumer Price Index (CPI) inflation is expected to decelerate to 3.0% in June from 3.2% in May. Similarly, the core figure is expected to fall to 2.5% from 2.6%. 

---

Your weekly market review was powered by Canaccord Wealth

---

Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity. Where investment is made in currencies other than the investor’s base currency, the value of those investments, and any income from them, will be affected by movements in exchange rates. This effect may be unfavourable as well as favourable. Past performance and future forecasts figures are not a reliable indicator of future results.