Construction Stocks Stand Out as KOSPI Falls 2.3%… Could AI Infrastructure Become a New Growth Driver?

The KOSPI opened higher but fell to the 6,900 level as news of Israeli military operations and rising international oil prices weighed on the market. It was down in the 2.3% range. The KOSDAQ held up relatively well, rising in the 0.5% range to around 848 points.

The won-dollar exchange rate edged up to around KRW 1,357 per dollar. Foreign investors recorded net sales of more than KRW 1.7 trillion in the main board market and more than KRW 1.2 trillion in the futures market. On the KOSDAQ, they were net buyers of about KRW 46 billion.

It was also noted that, unlike the period around the holiday when gains and losses were concentrated in semiconductors, the breadth of advancing stocks widened as the KOSPI recovered from 5,500 to near 7,000. About 80% of KOSPI constituents rose during the recovery, prompting attention to the possibility that investor sentiment and buying interest could spread beyond semiconductors.

U.S. inflation and employment data, along with earnings from semiconductor companies, were identified as key market drivers this week. The Bank of Japan’s minutes will be released Monday, alongside the European Association for the Study of Diabetes congress, while the U.S. JOLTS Job Openings and Labor Turnover Survey is due Tuesday. A U.S. ban on imports of Canadian products is also scheduled to take effect.

The U.S. personal consumption expenditures price index and gross domestic product figures are due Wednesday. Micron Technology will report earnings after the U.S. market closes the same day, with results expected around 6 a.m. Korea time on October 1. South Korea’s September trade data and the U.S. manufacturing PMI are due Thursday, while China’s markets will be closed for the National Day holiday from October 1 to 7.

The U.S. September employment report is due Friday. Inflation and jobs figures are expected to attract close attention because they could affect the interest-rate outlook. Micron has beaten market expectations with its earnings in each of the past two years, and its shares rose by double digits after the previous quarter’s results.

Muse, the AI assistant unveiled by Meta, is based on the company’s existing Muse Spark AI model and helps with tasks such as organizing email, filling out online forms, shopping and making reservations. The service launched first in the United States, offering both free access and paid subscriptions. User reviews have responded favorably to its ability to handle bookings and search tasks.

Muse downloads surpassed 3 million in the first 15 days after launch. Over the same period, ChatGPT was reported to have 1.6 million downloads and Gemini 300,000–400,000. Meta shares rose 36% in September and extended their gains last week, outperforming other major U.S. technology stocks.

Meta also unveiled related hardware, including AI glasses and Muse Charm, a necklace-style device. Its smart glasses, developed with Ray-Ban, feature design and functional improvements, and the company also introduced a lightweight model without a camera. Muse’s early success bolstered expectations that Meta’s large-scale AI investment could translate into real services and revenue, while expectations of increased AI hardware investment also supported the Philadelphia Semiconductor Index.

HLB Group stocks surged on news that a cholangiocarcinoma drug had received approval from the U.S. Food and Drug Administration (FDA). Some shares hit their daily upper price limit, while HLB rose to KRW 39,700, gaining more than KRW 9,000 on the day. The approval news lifted investor sentiment amid continued weakness across the pharmaceutical and biotech sectors.

Heo Hye-min, a researcher at Kiwoom Securities, said expectations for the pharmaceutical and biotech sector had fallen so low that stocks could be relatively insensitive to bad news and more responsive to positive developments. FDA approval is an important milestone in development, but actual commercialization and revenue generation still need to be verified separately.

HLB’s shares had previously weakened during the FDA review of another drug after issues arose concerning inspections and documentation at a Chinese manufacturing facility. Views differed on whether the rejection was due to technical issues or to the burden of reviewing a Chinese facility amid U.S.-China competition. Whether the latest approval will restore confidence in the group as a whole will depend on the review of follow-on pipeline candidates and their commercial performance.

Glass-substrate stocks rose after reports that Nvidia was considering adopting glass substrates. Conventional semiconductor substrates have mainly used plastic, but the material is vulnerable to heat and can bend, prompting the industry to develop new technologies using glass. Commercialization has been delayed, however, because manufacturing is difficult and demand has yet to develop sufficiently.

Quarter-end rebalancing flows may also have contributed to the day’s gains. Solar, glass substrate, biotech and secondary battery stocks—all of which had been under pressure—rebounded together, suggesting that investors should consider flow-related factors as well as company-specific news.

Within the smart-glasses value chain, components such as camera modules, MLCCs and substrates drew attention. LG Innotek was among the domestic companies mentioned, while the suppliers that could join the supply chain if Samsung moves ahead with a smart-glasses launch were also in focus. As this is still an early-stage industry with a limited market, actual sales growth and supply contracts will be important.

The U.S. 10-year Treasury yield touched 5.2% during the holiday and then moved in the 5.1%–5.2% range. With concerns that yields above 4.5% could become a growing burden, the market is watching to see whether long-term rates will remain above 5%.

Inflation concerns linked to oil prices and the situation in Iran contributed to the rise in yields. Comments from Federal Reserve officials and market expectations also shifted. Previously, a rate hike in October was considered unlikely, with one increase by year-end the main scenario under discussion. More recently, markets have begun to price in the possibility of two rate hikes this year.

The U.S. Treasury announced measures intended to expand Treasury buybacks to stabilize the market, but it was noted that the actual buyback limit had not been fully used. Concerns remain that the response may not be sufficient to contain rising yields, making this week’s inflation and employment data key factors in determining the next direction for long-term rates.

Iran proposed that the Strait of Hormuz be reopened within seven days, but the United States rejected the proposal. The Wall Street Journal reported that President Trump was preparing options for renewed strikes on Iran after the midterm elections. Oil prices came under upward pressure during Asian trading after the reports emerged.

WTI rose in the 0.9% range to $93 a barrel. Oil had previously fluctuated around $92 for a week, showing some signs of easing, but concerns that U.S.-Iran negotiations could again stall unsettled the near-term outlook for crude prices.

The Iranian negotiating team was expected to remain in the United States through Tuesday local time, and remarks also indicated that it was willing to meet with U.S. officials. However, with Washington taking a hard line and Tehran proposing a conditional ceasefire, it remains difficult to predict whether negotiations will advance.

Despite its high-profile schedule, the U.S.-China summit produced few concrete agreements. The two countries extended their trade truce by two months, moving its scheduled end date from November 10 to January 10. The prevailing assessment was that the focus was on preventing further deterioration and managing the status quo rather than resolving tensions.

China cited management of bilateral ties, a follow-up meeting at the G20, shared understanding on Iran, implementation of economic and trade agreements, cooperation on counternarcotics, and the launch of a U.S.-China AI dialogue as outcomes. The United States included trade and tariffs, energy supply chains, investment cooperation, diplomacy and security, superintelligence, and counternarcotics in its fact sheet.

The United States said China planned to import U.S. coal in 2027–2028 and also mentioned the activation of an investment committee. China’s announcement, by contrast, did not include energy or investment cooperation. Rare earths were also absent from China’s statement, while in AI, the two sides agreed only to establish a framework for dialogue and offered no concrete agreements.

Park Se-ra, a researcher at Shinyoung Securities, said she had observed major changes in the construction industry, including shifts in housing policy and the COVID-19 pandemic, over roughly a decade since publishing her first construction-sector report in 2015. In 2024, she critically assessed the sector’s low earnings visibility, lack of differentiation among major companies and inadequate shareholder returns. Unlike then, she said, new growth markets are now emerging and companies are differentiating their businesses, making this a time to take another look at the sector.

Park explained that construction companies had reduced legacy risks in recent years by recognizing costs from troubled sites in their earnings and resolving those projects. Practices such as avoiding lowest-price bidding and selecting projects with better profitability have also become more widespread. Participation in design from the FEED stage can reduce the risk of design changes and construction-cost fluctuations before the main construction phase. She also said Samsung E&A’s cost-control results on overseas projects had helped restore market confidence in overseas construction.

The roles of major construction companies are also becoming more clearly differentiated. Samsung C&T, Hyundai Engineering & Construction and Daewoo Engineering & Construction hold lead-contractor qualifications for nuclear power projects, while GS E&C and DL E&C focus on non-lead-contractor roles. Overseas orders are also increasingly focused on areas of strength rather than the aggressive expansion of the past. GS E&C has been building its data-center development and operations capabilities for years, while Samsung C&T and Samsung E&A are seen by the market as companies with exposure to U.S. expansion and semiconductor factory projects.

Park Se-ra said growth potential in construction is limited if companies rely solely on the domestic housing market, and highlighted the global market for AI industry infrastructure. As the focus of AI competition shifts from software to execution speed and infrastructure development, she said, the ability to build power plants and electricity facilities will matter alongside data centers. She believes that if Korean construction companies can participate as execution partners in overseas projects, the addressable market for the sector as a whole could expand.

In the United States, demand is growing for the rapid development of data centers and a manufacturing base. Park interpreted the Special Act on U.S. Investment and the list of related projects as part of a trend toward establishing a legal basis for Korean companies to carry out projects through U.S. subsidiaries or joint ventures with local companies. Even if individual projects involving gas, Alaska LNG and nuclear power appear disparate, she said they should be viewed within the broader framework of building the U.S. manufacturing and security ecosystem.

Given the construction variables and cost risks in the U.S. market, partnerships that share risks and returns with project owners are important, rather than entering through simple contracting as in the past. Overseas infrastructure projects require substantial capital, but Korean construction companies are considered to have stronger financial capacity than before. Park said using capital to build long-term growth platforms overseas, rather than tying it up solely in domestic housing projects, could lead to a reassessment of the sector.

Park Se-ra said orders for redevelopment and reconstruction projects at major construction companies had already entered a recovery phase. Orders in this category totaled less than KRW 20 trillion in 2024, but rose to around KRW 50 trillion last year. They had already exceeded KRW 50 trillion in the first half of this year, and she forecast that the annual total could reach KRW 80 trillion. Amid a looming supply shortage, large-scale redevelopment projects in Seoul with proven commercial viability are moving first, she said.

Key growth themes for the construction industry include nuclear power, semiconductor factories, AI data centers and postwar reconstruction. Park said it is difficult to time the sector precisely because stocks in project-based industries often price in narratives and expectations before actual figures emerge. However, given the tendency for markets to reflect issues about three months ahead, she said data centers and semiconductor factory starts and orders could return to the spotlight in forecasts for 2027 around year-end and the start of next year.

Postwar reconstruction could involve not only rebuilding destroyed facilities but also reorganizing energy supply chains, oil fields and power grids. Construction companies already operating locally and equipped with personnel and materials are well positioned for reconstruction projects. Samsung E&A, with numerous projects in the Middle East, was cited as a relevant example. Park also suggested that a rotation of investor interest could extend from large-cap stocks to mid-sized construction companies and building-materials firms.

Lee Kwang-soo said the market’s advance reaction to news related to Iran did not necessarily need to be viewed negatively. It could signal a shift in the direction of negotiations and military responses. If tensions between the United States and Iran ease, pressure from oil prices and interest rates could also lessen, making it important to watch for progress in negotiations.

He pointed to the possibility that market attention could broaden to other sectors after repeated sharp rallies and corrections led by semiconductors. Construction stocks, he argued, should not rise and fall solely on brief reconstruction headlines or nuclear-power themes; they need to demonstrate a business vision and earnings stability that investors can rely on over the long term. He stressed that construction companies must prove the sustainability of their orders and earnings to restore market confidence.

He said construction companies should invest efficiently in data centers and overseas infrastructure rather than simply accumulating cash, and should create structures that allow them to participate in projects alongside clients. Given that the sector does not require factories and large-scale research and development investment, he also believes companies should set out more active shareholder-return policies. He said construction stocks can be reassessed beyond short-term themes only if business competitiveness, capital allocation and shareholder returns improve together.