Small and Mid-Cap Stocks, Will They Benefit from IT?

Samsung Electronics and SK Hynix Stocks Pull Together... Expecting Spillover Effect on Semiconductor-Related Small and Mid-Cap Stocks

[Asia Economy Reporter Kum Boryeong] Since the end of last year, as the stock prices of major IT companies such as Samsung Electronics and SK Hynix have surged, attention is focused on whether related small and mid-cap stocks can also benefit from the trickle-down effect.

According to the Korea Exchange on the 21st, Samsung Electronics' stock price soared to 62,800 KRW intraday, marking a 52-week high. The closing price, which was 53,000 KRW on October 21 last year, rose to 62,400 KRW the previous day, an increase of 24.06% in three months. SK Hynix also jumped 28.9% from 77,500 KRW to 99,900 KRW during the same period.

The IT fund showed a return of 4.7% since the beginning of the year. This is the highest figure among 43 thematic funds classified by the fund rating company FnGuide. The second place is the Samsung Group fund, which includes Samsung Electronics. Looking at the 1-month and 3-month returns, the IT fund also performed well at 7.57% and 13.98%, respectively. Capital continues to flow in as well. The IT fund attracted 20.4 billion KRW since the beginning of the year and 117.8 billion KRW over three months.

The factor driving IT stock prices is the expectation that prices of major semiconductors such as DRAM will rise. Jo Seungbin, a researcher at Daishin Securities, explained, "The earnings forecasts have been revised upward due to the outlook that both DRAM and NAND prices will rise faster than previously expected. DRAM is expected to see expanded mobile demand amid steady server demand, and NAND prices are expected to rise sharply due to the fire at Kioxia (formerly Toshiba)."

Accordingly, there is growing interest in whether small and mid-cap stocks can also benefit. In particular, as Samsung Electronics is expected to increase semiconductor equipment investment, it is highly likely that market attention will focus on non-memory sectors and companies with previously high NAND exposure.

Choi Youngsan, a researcher at eBest Investment & Securities, analyzed, "Samsung Electronics' semiconductor equipment investment is definitely a positive factor for the stock prices of domestic small and mid-cap semiconductor sectors. Interest will increase in assembly and test (OSAT) companies such as TES and Hana Micron in the non-memory market, as well as design house companies like AD Technology."