Samsung Electronics and SK hynix Stumble, and These Stocks Take Off... "Now Is the Time to Buy Materials, Parts and Equipment Stocks"

[Financial News] While large-cap semiconductor stocks such as Samsung Electronics and SK hynix remained stuck in a trading range, KOSDAQ climbed back above 900 for the first time in three months, powered by an explosive rally in semiconductor materials, parts and equipment stocks. As the boost from AI capital spending spreads in earnest to smaller supporting industries, returns on related exchange-traded funds (ETFs) have surged and investment flows have also poured in.

According to the Korea Exchange (KRX) on the 6th, the KOSDAQ index climbed as high as 903.88 during last week, from September 28 to October 2, recovering above 900 for the first time in three months since early July. After rebounding sharply from a low in the 630 range in late July, it rose 18.9% over August and September, far outpacing the KOSPI's 3.7% return during the same period.
Semiconductor materials, parts and equipment stocks were the main force behind the rebound. According to Eugene Investment & Securities, the KOSDAQ semiconductor sector index rose 44.5% in August and September. This stood in stark contrast to Samsung Electronics and SK hynix, which gained only 2.3% and 3.4%, respectively, during the same period.
The strength of materials, parts and equipment stocks was also evident in the performance of related ETFs. Five of the ten best-performing domestic ETFs over the past month, from September 2 to October 2, were semiconductor process and materials, parts and equipment products. Led by the SOL Semiconductor Front-End Process ETF, which rose 28.55%, the NH-Amundi HANARO Semiconductor Core Process Leaders ETF, the SOL AI Semiconductor Materials, Parts & Equipment ETF, the KODEX AI Semiconductor Core Equipment ETF and the SOL Semiconductor Back-End Process ETF posted gains of 27.78%, 27.35%, 26.94% and 25.65%, respectively.

Experts say that investments in AI infrastructure by global big tech companies and rising memory semiconductor prices are translating into tangible benefits for small and mid-sized suppliers.
Noh Geun-chang, head of Semicon Research Lab, said, "The semiconductor upcycle triggered by growing AI demand will continue until at least 2028. The areas benefiting are also rapidly expanding from HBM, or high-bandwidth memory, and GPUs to CPUs, substrates, and key equipment and parts." He forecast that equipment and parts companies would continue to post structurally strong earnings, as major manufacturers including Samsung Electronics, SK hynix and TSMC are expected to continue expanding new fabs and upgrading their processes for years to come.
Securities analysts also believe that an investment strategy focused on materials, parts and equipment stocks will remain effective for the time being. Hwang San-hae, an analyst at LS Securities, noted, "As capital expenditures by large semiconductor companies become visible, the materials, parts and equipment sector is leading the KOSDAQ rally. KOSDAQ materials, parts and equipment stocks have relatively low exposure to sustained selling by foreign investors and are expected to receive structural benefits, so their relative strength is likely to continue."

Short-term changes in investment flows are likely to be an important factor to watch. Regular rebalancing of semiconductor-related ETFs worth approximately 18.1 trillion won, including leveraged and covered-call products, is scheduled for this month. Volatility increased last month as the weights of Samsung Electronics and other stocks were adjusted during the KRX sector index's regular rebalancing, so changes in fund flows by individual stock are expected this time as well.
Samsung Electronics' preliminary third-quarter earnings announcement, scheduled for the 8th, is another key inflection point. If earnings momentum among large caps recovers and a sustained rebound begins, fund flows that had been concentrated in KOSDAQ materials, parts and equipment stocks could flow back into large-cap KOSPI stocks.
Kim Jong-min, an analyst at Samsung Securities, advised, "Until a sustained breakout by large caps is confirmed, an alpha strategy based on individual-stock momentum is advantageous. At this point, it is effective to gradually increase the weighting of large caps while also aggressively increasing exposure to small- and mid-cap stocks. "

[email protected] Moon Young-jin Reporter