"The ‘Dream 9,000-Point Level’: Samsung and SK hynix Really Did Drive the Gains"

[Financial News] The KOSPI Composite Index’s climb to a peak above 9,000 this year was driven overwhelmingly by Samsung Electronics and SK hynix. As the index rose from the 8,000-point level to the 9,000-point level, the two stocks accounted for 99% of the increase.
The two stocks also accounted for 69.3% of the decline as the KOSPI Composite Index subsequently fell from around 9,100 to around 5,500. The Bank of Korea (BOK) analyzed that domestic stock-market volatility had increased as concentration in semiconductor stocks coincided with leveraged investment and large-scale foreign selling.
According to the Monetary and Credit Policy Report released by the BOK on the 10th, domestic stock-market volatility from January through July this year was high compared with past crisis periods and major economies. In a comparison of the standard deviations of daily returns for the benchmark indexes of the 30 countries with the largest market capitalizations, Korea recorded 4.1%, the highest among the 30 countries.
The BOK explained that expectations of a global artificial intelligence (AI) and semiconductor boom had pushed up the share prices of a small number of semiconductor companies, increasing the sensitivity of the domestic stock market. Samsung Electronics and SK hynix made increasingly large contributions to the KOSPI Composite Index’s gains as the index reached higher levels.
When the KOSPI Composite Index rose from above 5,000 for the first time to the 6,000-point level, Samsung Electronics and SK hynix had a combined contribution of 50.8%. The figure rose to 73.2% in the 6,000-to-7,000 range and 94.6% in the 7,000-to-8,000 range. In the final 1,000-point stretch, from 8,000 to 9,000, it reached 99.0%.
The two stocks also had a major impact during the decline. When the KOSPI Composite Index fell from around 9,100 to around 5,500, Samsung Electronics and SK hynix accounted for 69.3% of the movement. The BOK analyzed, "As stock-price gains driven by expectations of a global AI and semiconductor boom became concentrated in a small number of semiconductor companies, the domestic stock market became more sensitive to changes in the outlook for the memory semiconductor industry."
The concentration in semiconductor stocks, combined with large-scale foreign selling and increased leveraged investment at home and abroad, further heightened stock-market volatility. As domestic stock prices rose more sharply than those in major economies, foreign investors engaged in large-scale technical selling to take profits and rebalance their portfolios, affecting supply and demand conditions in the domestic stock market.
The surge in investment in leveraged exchange-traded funds (ETFs) was also cited as a factor that increased volatility from a supply-and-demand perspective. In international financial markets, leveraged investment targeting Korean stocks increased, while related effects continued to spread as domestic spot and futures transactions for hedging purposes grew.
Volatility has eased somewhat recently as a substantial portion of leveraged positions has been unwound. However, the BOK stressed, "Factors driving increased volatility, including concentration in the semiconductor sector, remain," adding, "In the short term, inspections of leveraged ETFs and borrowed-stock investments should be strengthened. Over the medium to long term, it is necessary to ease market concentration in specific sectors and companies and broaden the investor base."

[email protected] Han Seung-gon Reporter