[Focus] KOSPI Hits Record High…”Semiconductor Concentration” Concerns vs. ”Virtuous Market Cycle” Expectations

While the KOSPI continues its record-breaking rally, a closer look inside the market reveals significant disparities. Complaints are growing among investors that the index is rising but their actual returns are not keeping pace. This is because large-cap semiconductor stocks such as Samsung Electronics and SK Hynix are driving the index's gains, while a considerable number of other stocks are showing relatively sluggish performance.

Accordingly, the stock market is simultaneously seeing assessments that this is a ”semiconductor-only party” and counterarguments that ”semiconductors will eventually lift the entire market.” The debate over the true nature of the KOSPI's ascent is gradually expanding.

■ ”The Index Hits New Highs, but My Account Stays Put”

Those concerned about the semiconductor concentration phenomenon point out that the current market is overly dependent on a specific industry. As expectations from expanded artificial intelligence (AI) investments and global data center expansions are concentrated on Samsung Electronics and SK Hynix, the index's rise is being driven by only a handful of stocks.

In fact, when stock prices of large-cap semiconductor companies rise, the index goes up, but small and mid-cap stocks, domestic demand stocks, and some traditional manufacturing stocks can be relatively marginalized. Because of this, investors are reacting by saying, ”The index is at a record high, but my account is stuck in place.”

Some cite past examples where capital was excessively concentrated in a specific industry, warning that a semiconductor-led uptrend could lead to a bubble. There is analysis that if expectations for AI industry growth run too far ahead of actual corporate earnings growth rates, valuation burdens could increase.

■ ”The Semiconductor Boom Will Spread to the Entire Market”

On the other hand, a significant number of market participants view the semiconductor strength positively. The logic is that since semiconductors are a core export industry for South Korea, improvements in the sector can spread throughout the broader economy through corporate earnings and expanded investments.

Improved earnings for Samsung Electronics and SK Hynix could lead to increased sales across the entire related industrial ecosystem, including equipment companies, materials companies, and parts manufacturers. In fact, during past semiconductor supercycles, benefits spread not only to equipment and materials companies but also to the logistics, construction, and industrial materials sectors. Furthermore, expanded investments by semiconductor companies trigger job growth and facility investments, which in turn can lead to improvements in consumption and domestic demand.

Some in the market are expressing hopes that the current semiconductor-led rally could serve as a starting point for capital to spread to other growth industries in the future, such as automobiles, power equipment, shipbuilding, robotics, and AI software. Ultimately, the key assessment is whether the semiconductor rally will remain an isolated phenomenon or lead to profit growth across the broader market.

■ ”Difficult to Interpret Solely as Semiconductor Bias or a Bubble”

A securities industry official stated, ”It is true that a significant portion of the current KOSPI rally is explained by semiconductors,” but added, ”Given the domestic industrial structure, the semiconductor industry has a large ripple effect on other industries, making it difficult to interpret simply as concentration or a bubble.” They further added, ”Whether improvements in semiconductor earnings spread to profit increases in other industries will be an important criterion for judging the sustainability of this bull market.”

The market is weighting the possibility that semiconductor-centered strength will continue for the time being. However, given that a true bull market is not one where only a specific industry rises but one where various industries grow together, investor attention is focusing on how far capital flows can spread beyond semiconductors in the future.

[This is an AI-assisted article. The provided information is a general guide only, and final decisions and choices require personal responsibility and careful consideration. For important matters, it is recommended to seek the advice of an expert. This publication bears no responsibility.]