JAPAN FIRST TO MARKET

Research evidence excerpt

JAPAN FIRST TO MARKET

Asia Pacific Equity Research

Japan First to Market 28 July 2026

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Japan Equity Strategy (Rie Nishihara)

Rising Correlation Between the Nikkei 225 and KOSPI, and the Outlook Ahead

The correlation between the Nikkei 225 and KOSPI has been strengthening, evident both during the feverish rally in April–June

and the subsequent correction phase in July. Figure 1CorelationBetwentheNikeiAverageandKOSPI shows that the correlation between the two markets has been rising

since 2025, compared to the 2022–2024 average. One key factor is the growing weighting of the market cap of Samsung

Electronics and SK Hynix within KOSPI, which has strengthened the correlation with the Nikkei Semiconductor Index (an AI

semiconductor index of 30 companies, accounting for about one-third of the Nikkei 225's market capitalization). The KOSPI

surged in February 2026, when Bloomberg consensus estimates for US hyperscaler capital expenditures began to be rapidly

revised upward, and again after the April earnings announcements (Figure 2 CapexofUSHyperscalersandJapan/KoreaStockIndices). This was followed by a shift of AI tech fund flows

into the Nikkei Semiconductor Index and the Nikkei 225, driving Japanese semiconductor share prices higher. In June, the

pace of gains in the Nikkei Semiconductor Index even outpaced KOSPI’s earlier surge. Kioxia Holdings, which saw a significant

share price gain in April–June, saw its P/E decline due to upward revisions to Bloomberg consensus EPS estimates for FY2026

and FY2027, while electronic components makers (MLCCs: Murata Mfg. and Taiyo Yuden) saw their P/Es rise, pushing up

share prices (see report). The Nikkei 225 peaked on June 22 and 25, and then entered a moderate correction, during