Will IT Stocks That Led the Early-Year Stock Market Continue Their Leadership?

[Asia Economy Reporter Song Hwajeong] As IT stocks are leading the stock market rally at the beginning of the year, attention is focused on how long the leadership of IT stocks can continue.

Jo Byunghyun, a researcher at Yuanta Securities, said, "The upward trend in the IT sector that has continued since last year accelerated further at the beginning of the year, deepening concerns about how long the leadership will last," adding, "The market capitalization weight of the two stocks, Samsung Electronics and SK Hynix, already exceeds 30% compared to the KOSPI." Researcher Jo said, "From experience, stagnation in market capitalization weight occurs when the sector's earnings outlook improvement phase comes to an end," and added, "At least from a visible perspective, this can be considered the early stage of a recovery phase."

There is an analysis that the domestic semiconductor inventory cycle could improve as the U.S. manufacturing situation shows signs of improvement. Researcher Jo said, "Last week, the manufacturing indices in Philadelphia and New York both exceeded consensus and the previous month's figures, indicating that the U.S. manufacturing index, which had been in a prolonged decline due to trade disputes and other factors, has begun to form an inflection point," adding, "This can be seen as a factor leading to further improvement in Korea's semiconductor inventory cycle, which in turn can drive an improvement in the earnings outlook for the domestic IT sector."

The recovery of investment by U.S. IT companies is also a positive factor. Researcher Jo said, "The improvement in the capital expenditure (CAPEX) cycle of the U.S. IT and telecommunications & communication sectors is also expected to be positive," and added, "The recovery of investment in these sectors, which can be considered one of the major demand sources for domestic semiconductors, is directly linked to the earnings cycle of the domestic IT sector." Researcher Jo added, "Even if there is some burden from valuation or technical interest, the leadership role of the IT sector's leading stocks can continue further."