“I'd put all my money in South Korea, but I'd never touch the KOSPI” | 10 Fast with Michael Fritzell
Welcome to KonichiValue 10 Fast, the show where we put guests in the hot seat for 10 straight-to-the-point questions.Today, Michael Fritzell, my dear friend and mastermind behind the institutional-grade equity research over at Asian Century Stocks, joins me to break down South Korea’s massive reforms, the brutal reality of Asian value traps, and why the global AI race is going to end in total commoditization.(Disclaimer: Any stocks or investments discussed are not financial advice; this conversation is strictly for entertainment purposes only.)1. The Five-Year Bet: Which Asian Country Gets Your Entire Net Worth?Michael Fritzell: South Korea. They are actively copying the corporate reform playbook that the Tokyo Stock Exchange pioneered. While everyone is staring at the major indices, I see massive, underappreciated value across the small-cap space, a universe of two to three thousand stocks that are significantly cheaper than anything you will find in other developed markets.The real catalyst is the mid-2025 introduction of fiduciary duty for directors. Directors will finally be legally responsible for all shareholders’ interests, not just the controlling family blocks. This makes minority abuse and shady related-party transactions incredibly difficult to pull off. Shareholder activism is blossoming early here, meaning minority investors can simply piggyback on campaigns by powerhouse firms like Oasis and Dalton to unlock deep value.However, do not touch the major index. I would never buy the Kospi right here. Its entire rally has been artificially driven by AI CapEx and memory chip stocks experiencing a massive squeeze in DRAM prices, which is completely unsustainable over the long term.2. The Dumbest Value Trap Western Investors Fall For in AsiaMichael Fritzell: Investors consistently fail to look at the actual character of the people running the business. The hard truth about investing in Asia, or honestly anywhere, is that you cannot rely on the legal system to protect you. At the end of the day, if these people want to cheat you, they can.You have to ignore the spreadsheet and audit their public track record instead. Look at their historical capital allocation, their corporate structure complexity, and whether they have a habit of diluting shareholders or routing money into sister companies.A stock can look flawless on paper with 60% to 70% of its market cap sitting entirely in cash. But if the founder has a decades-long track record of refusing to pay out a single cent, that cash position is completely irrelevant, it is a value trap. You are stuck waiting for a generational shift, like a son taking over the business and finally launching buybacks or dividends.3. Singapore vs. Tokyo: Why Do Expats Choose the Lion City?Michael Fritzell: Singapore wins purely on the perception that the hurdles to entry are lower, backed by world-class government marketing. The Singaporean government literally sponsored part of the production for Crazy Rich Asians because they understand how to build a global brand name. It just feels easier to integrate there initially.Objectively, Tokyo is one of the coolest cities on earth, and Japan has an incredible, relaxed vibe where people seem genuinely more content. If Japan offered a legitimate golden visa and competitive tax benefits for expats, people like me would flock to Tokyo over Singapore in a heartbeat.4. Will Japan’s GDP Shrink or Grow Over the Next Decade?Michael Fritzell: Japan is fundamentally losing its structural competitiveness. Giants like Toyota and Daikin used to completely dominate export markets in developing countries, but they are now facing brutal competition from private Chinese companies led by young, hungry, 40-something managers.Because of this, I expect Japan to suffer continued market share loss and a relative decline in GDP per capita. To reverse this, Japan desperately needs aggressive entrepreneurship from younger people who want to get rich, rather than just coasting on legacy firms formed in the 1950s and 60s like Sony and Casio. We need to see a Japanese equivalent of Spotify pop up, but those examples are incredibly rare right now.5. The Best Political Leader in Asian HistoryMichael Fritzell: Deng Xiaoping. He did an immeasurable service to the Chinese population by dragging the country out of an incredibly backward, painful state during the 1960s. People frequently try to rewrite history, but the reality of that era was exceptionally rough.That said, history hasn’t ended yet. China remains a communist country, and under the current framework, we still do not know where the economy will ultimately end up.6. Can the Rest of Asia Compete in the Global AI Race?Michael Fritzell: The software side of large language models is going to be completely commoditized. China has the capital and resources to copy and keep pace with American models, but outside of the US and China, no one else is going to build a standalone giant.The structural issue with AI models is a total lack of pricing power because there are too many substitutes. There is very little true differentiation between Gemini, ChatGPT, or DeepSeek. Eventually, the hype will fade, the technology will commoditize, and the rest of the world will simply default to the cheapest, most accessible models provided by Google or Chinese tech giants.7. Does Europe Have an Economic Future?Michael Fritzell: Europe will be fine; the absolute doom loop narrative is completely off-base. Europe’s manufacturing base was crushed over the last 30 years because Western multinationals outsourced their factories to China, allowing their technological know-how to be copied. Now, that tech spillover is grinding to a halt as foreign direct investment into China plummets.Meanwhile, places like the Nordic region maintain incredibly vibrant entrepreneurship and exceptional living standards. The current financial media is dominated by social-media-driven culture wars and a hyper-hot US stock market narrative. Back in 2010, the narrative was that the US was dying under a mountain of debt. Narratives shift rapidly, and the current misperceptions about Europe will disappear over time.8. Are Chinese Stocks Uninvestable or the Bargain of the Decade?Michael Fritzell: Over the long term, you simply should not invest in countries that refuse to protect minority shareholders. In China, the penalties for cheating foreign investors are virtually nonexistent. The Chinese internet index (KWEB) has been entirely flat for 10 years during the greatest Nasdaq tech bull market in history, and the CSI 300 is flat over a 35-year horizon.This isn’t because the underlying companies are bad, they are actually performing very well operationally. It is the direct result of continuous share dilution and the atrocious treatment of minorities. Aside from massive, shareholder-friendly exceptions like Tencent or NetEase, foreign capital is heavily exposed. The domestic A-share market will survive because locals need an inflation hedge to protect their savings, but for foreigners, it remains highly hazardous.9. The One Asian Market to Avoid Right NowMichael Fritzell: India. Prime Minister Modi has done fantastic things for the country’s infrastructure and entrepreneurship, but the valuation multiples make absolutely no sense. You have standard Indian consumer stocks trading at 40, 50, or 60 times PE.These businesses are not managed any better than equivalent companies in the Philippines or Indonesia, yet in Indonesia, you are only paying 8 times PE for the exact same fundamental quality. When a market’s story becomes that extreme, it is time to take the other side of the trade.10. Asia’s Finest: The Most Important Business Leader in the RegionMichael Fritzell: Morris Chang, the founder of TSMC. Building a $2 trillion powerhouse out of Taiwan, a small island of just 22 million people, is one of the most remarkable feats in business history. Not even mainland China has successfully built a trillion-dollar company.Chang completely revolutionized global tech by pioneering the independent foundry model. Instead of building closed ecosystems like Intel, TSMC acted as a neutral manufacturing partner for fabless chip designers worldwide. This strategy unlocked massive scale, generated immense returns on equity, and allowed them to out-invest the entire world in R&D. Even if they face future headwinds, the modern technological world entirely exists because of Morris Chang’s blueprint. Get full access to KonichiValue Japan at www.konichivalue.com/subscribe Get full access to KonichiValue Japan at www.konichivalue.com/subscribe
