Cosmetics Rally and K-Defense's Edge Take Center Stage as Kospi Cools on Iran-US Tensions

Foreign Buying Absent, Kospi Slides Intraday

Early in the show, hosts addressed concerns that the market has entered a rotational phase without a new source of buying, but argued there's little room for further foreign outflows given how much foreign capital has already left. Global houses such as JPMorgan and BlackRock have repeatedly named Korea their top pick within Asia, suggesting foreign investors are likely to keep raising their Korea weighting through year-end.

The National Pension Service has resumed buying domestic equities, and if the conversion of retirement pensions into a national fund moves forward — a pool of roughly 400-500 trillion won — hundreds of trillions of won in fresh capital could eventually flow into the market. Still, Korean retail money invested overseas has been slow to return home, and a backlog of major US IPOs means capital flows will likely stay roughly balanced for now.

As the discussion continued, Kospi extended its decline to nearly 2%, falling to around the 6,300 level, with foreigners and institutions both turning net sellers. Samsung Electronics turned negative, SK Hynix dropped about 3%, and Kosdaq fell around 2% with some battery and biotech names under pressure.

Cosmetics Stocks Rebound, K-Defense's Competitive Edge

Long-neglected cosmetics stocks, mostly small and mid caps, surged today with several hitting the daily limit. The group had been weighed down by concerns over slowing overseas growth, but signs of an export recovery combined with a rebound in domestic consumption plays such as food, department stores and marts fueled a turnaround narrative.

With thousands of cosmetics brands now registered domestically, most rely on contract manufacturers rather than their own factories. Large OEM/ODM makers such as Kolmar Korea, Cosmax and Cosmecca Korea — companies that produce under original-equipment or original-design manufacturing arrangements — are seen as prime beneficiaries of the export recovery.

Former DAPA chief Kang Eun-ho framed the defense industry as one that 'provides the power to keep the peace.' Just as a military's core purpose is to deter war and, failing that, secure victory with minimal loss of life, he said arms exports are meant to help protect allies' peace as well — and that soft power alone cannot protect a nation that lacks the hard power to defend itself.

He cited price competitiveness and fast delivery — roughly two and a half years versus five to seven years for major European suppliers — along with steadily built government-to-government trust, continuous technology investment, and weapons systems proven through the Korean military's own sustained operational use as the core strengths behind K-defense. He traced this back to Korea's technical history, from repairing US M47 tanks left behind after the Vietnam War to developing the fully indigenous K2 tank.

He also noted that Korean defense firms have embedded this identity in their names — LIG Nexone recently rebranded as LIG Defense & Aerospace — in contrast to the US Department of Defense's recent renaming to include 'War.' Japan, he said, is gradually easing arms export restrictions but remains cautious given domestic sentiment and importer wariness, whereas Korea's lack of any history of invading other nations gives it a trust advantage.

Next Week's Economic Calendar and Earnings

Next week brings the Fed's rate decision (early Thursday morning Korea time) and the ECB's rate decision the same day. US GDP and the PCE price index are due Thursday night, and markets in Korea, China, Hong Kong, Taiwan, France and Germany will be closed Friday.

Hosts expect most central banks to hold rates given elevated uncertainty, but flagged Japan's timing on a potential hike, Europe's room to raise rates despite inflation pressure, and the possibility that this could be Fed Chair Powell's last meeting as points worth watching. A heavy earnings slate is also due, including LG Innotek, SKC, ISC, Doosan Enerbility, Hyundai Engineering & Construction, the Ecopro group, Samsung Electronics' confirmed results, Hanwha Aerospace, Naver, LG Energy Solution, Samsung Heavy Industries and GS Engineering & Construction.

Iran-US Tensions and a Taiwan Tailwind

Today's decline wasn't Korea-specific — it tracked conflicting headlines over whether the Iran-US standoff would end, plus President Trump's comments that the US would maintain its blockade stance, which pushed WTI crude to around $94. US futures fell nearly 1%, dragging down Taiwan, Japan and other Asian markets alongside Korea.

Taiwan's Taiex, by contrast, rose as TSMC shares gained 4-5% after Taiwanese authorities announced they would ease single-stock investment limits for equity funds and active ETFs. Since TSMC accounts for roughly half of the index, hosts argued this should improve TSMC's demand-supply picture — and said Korea needs to move just as quickly on similar reforms.

On K-defense's overseas prospects, hosts noted that while European countries are leaning into a 'Buy European' stance, France's strength lies in naval and air power while Germany's lies in ground systems — leaving room for Korea to partner by segment and expand its global footprint. Middle Eastern countries, having seen how vital self-defense capability is in recent conflicts, are moving to build up their own defense industries while showing growing interest in systems like the high-success-rate Cheongung interceptor, and requests for industrial cooperation from advanced economies — including a Canadian submarine program — are also increasing.

Defense R&D Budgets and Government-to-Government Trust

Defense R&D spending was cut only once in recent memory — under the Yoon Suk-yeol administration — before the Lee Jae-myung administration restored and expanded it again. Investment is now flowing toward integrating physical AI into nearly every weapons system, alongside the defense ministry's plan to build a roughly 500,000-strong drone force and the Defense Acquisition Program Administration's ten priority future-defense technologies.

Hosts stressed that arms exports depend not just on technology and manufacturing capability but on government-to-government trust, particularly between heads of state. A recent example cited was the possibility of an additional roughly 200 units of India-built K9 self-propelled howitzers following a summit between President Lee and Prime Minister Modi.

Domestic orders are typically supplied at thinner margins while export deals allow room to negotiate better terms — a structure hosts attributed to defense executives' 'business as service to the nation' mindset on domestic sales. Export growth accelerated with government backing in the early 2020s, and since revenue is recognized two to three years after contracts are signed, that lag is seen as the reason defense companies' operating profits have risen sharply in recent years.

Volatility Driven by Greed, and What the Numbers Don't Show

Host Lee Kwang-soo traced today's continued intraday swings to investor 'greed.' Even investors already sitting on gains grow anxious chasing higher returns, he said, which leaves the market reactive to minor news and earnings — a pattern he expects to persist for a while.

He noted that foreign investors typically fill a pre-set order regardless of price, while retail investors chase prices higher and hold off buying on bad news, making their decisions far more price-dependent. For that reason, he said, tracking whether foreign buying returns remains the best gauge of the market's direction.

On the recent shift from ETFs into individual stocks among retail investors, he argued there's no inherently right or wrong method — what matters is whether an investor can actually execute that method well. Citing a report by KB Securities analyst Kim Min-gyu, he noted that crediting one's own skill for gains made via an ETF can push investors toward individual stock-picking, and urged viewers to ask whether a trending approach truly suits them rather than simply following the crowd.

Toward the close, hosts reported that first-quarter GDP growth came in at roughly 1.7%, a five-and-a-half-year high, with Kospi also near record levels. Lee said that even as these numbers look strong, he keeps asking himself whether ordinary people's lives are actually improving or whether only asset holders are getting richer — and said the show would keep its focus on investing that benefits the many rather than the few.