Korea Leads Rebound, China Sets Lower Growth Target | The Asia Trade 3/5/2026
Speakers
Summary
- South Korea Volatility: The South Korean market experienced a massive crash (worst on record) driven by leverage flushes, but is now rebounding (+3% on the KOSPI). Strategists view this as a "buy the dip" opportunity, specifically in memory chip sectors (Samsung/SK Hynix) due to strong AI demand.
- China NPC Targets: Beijing set a 2026 GDP growth target of 4.5%–5% (lowest since 1991) and a 7% increase in defense spending. The focus is shifting heavily toward "tech self-sufficiency" and AI to counter US restrictions.
- Middle East Conflict (Iran War): The conflict is active, with the US depleting munitions. While markets have been benign, there is a "race" between Iranian missile deployment and US interceptor depletion, creating a long-term replenishment cycle for defense contractors.
- Private Credit Resilience: Despite macro headwinds, Goldman Sachs reports low non-accrual rates (1-2%) in private credit. The thesis is that large alternative asset managers are navigating the high-rate/conflict environment better than public perception suggests.
Trade Ideas
The US is actively engaging in the Iran conflict, using expensive interceptors to shoot down cheap drones/missiles. Secretary Blinken explicitly worries about "depleting our arsenal." This is a war of attrition. The "burn rate" of munitions (Patriots, interceptors) is exceeding production. Regardless of how the war ends, the US government must sign massive contracts to replenish stockpiles to deter China/Russia. This guarantees revenue for prime defense contractors for years. Long. The "depletion" narrative ensures a floor on order books. A sudden, negotiated peace deal could cause a short-term selloff (profit-taking).
South Korean markets crashed (driven by retail leverage/margin calls) but fundamentals in the semiconductor sector (Samsung/SK Hynix) remain strong due to AI memory demand. The crash was a technical "clearing event" (margin flush), not a fundamental break. With the KOSPI rebounding and earnings revisions for chipmakers up 20-30%, the entry point is attractive. Since Samsung/Hynix lack liquid US listings, the Korea ETF (EWY) and their US memory peer Micron (MU) are the direct beneficiaries of this rebound. Long. The "AI Squeeze" in memory chips is still valid, and the price dislocation offers a discount. Escalation in the Middle East spikes oil prices (Korea is a net energy importer), crushing margins.
Goldman Sachs Private Credit reports non-accrual rates are remarkably low (1-2%) and portfolio companies are resilient. The market fears a credit crunch, but large alternative asset managers (Alts) focus on cash-flow-generative, recession-resistant sectors. As banks retreat or face regulation, these private giants capture market share and maintain high yields. Long. The "fear" of private credit blowing up is disconnected from the "reality" of their current performance. A deep, prolonged recession eventually hits EBITDA, causing defaults to spike.
China set a lower GDP target (4.5-5%) but maintained a 7% increase in defense spending and emphasized "Tech Self-Sufficiency" and "Indigenous Innovation" in the NPC work report. Beijing is pivoting from broad infrastructure stimulus to targeted tech investment (AI, Chips) to survive US sanctions. While the broad economy is slowing, state capital will flood into domestic tech hardware and software companies. Watch/Neutral. The policy tailwind is there, but the lack of "Big Bang" consumption stimulus makes the broad sector risky. Focus should be on hardware/semis (CQQQ) rather than consumer internet (KWEB). US-China relations deteriorate further during President Trump's upcoming visit.
Up Next
This Bloomberg Markets video, published March 05, 2026, features Ambassador / Jung, Billy Leung, James Reynolds, Stephen Engle discussing RTX, LMT, GD, EWY, MU, BX, KKR, APO, KWEB, CQQQ. 4 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Ambassador / Jung, Billy Leung, James Reynolds, Stephen Engle · Tickers: RTX, LMT, GD, EWY, MU, BX, KKR, APO, KWEB, CQQQ