[MarketING] Semiconductor Attracting Foreign Buying Frenzy, Will the Rally Continue?

KOSPI Hits New High, Surpasses 2580 Level
Semiconductor Strength Continues Amid Foreign Buying Pressure

As uncertainty over the debt ceiling negotiations eased, the KOSPI reached a new all-time high, climbing to the 2580 level. Foreign investors and semiconductor stocks led the KOSPI's record high. With concentrated foreign buying, Samsung Electronics recovered to the 72,000 KRW range, and SK Hynix regained the 110,000 KRW level.

KOSPI Recovers to 2580 Level

On the 30th, the KOSPI closed at 2,585.52, up 26.71 points (1.04%) from the previous day. The KOSDAQ ended the session at 851.50, rising 8.27 points (0.98%). This marks the first time this year that the KOSPI closed above the 2580 level. The KOSDAQ rebounded after four days, reclaiming the 850 level.

[Image source=Yonhap News]

Foreign investors and semiconductor stocks drove the KOSPI's new all-time high. Foreign buying was concentrated in semiconductor stocks, which showed strong gains and lifted the KOSPI. On that day, foreign investors net purchased 675.4 billion KRW in the KOSPI market and 114.5 billion KRW in the KOSDAQ market. Institutions net sold 112.3 billion KRW in the KOSPI market but bought 110.7 billion KRW in the KOSDAQ market. Individual investors sold 542.6 billion KRW and 214.1 billion KRW in the two markets, respectively.

With concentrated foreign buying, Samsung Electronics and SK Hynix both hit 52-week highs. Samsung Electronics closed at 72,300 KRW, up 2.84% from the previous day. SK Hynix ended at 110,300 KRW, up 1.01%. Foreign investors were the largest buyers of Samsung Electronics with net purchases of 447.2 billion KRW, followed by SK Hynix with 162.3 billion KRW.

Kim Seok-hwan, a researcher at Mirae Asset Securities, analyzed, "During the holiday, the resolution of the U.S. debt ceiling negotiations and the unveiling of new AI-based products and services by Nvidia boosted risk appetite, and the KOSPI reached a new high driven by foreign investors' concentrated buying in the electrical and electronics sector. Expectations for a surge in memory semiconductor demand due to AI industry development and the visible effects of Samsung Electronics' production cuts in the second half positively influenced the market."

AI expectations and Nvidia's earnings announcement served as triggers for the semiconductor rebound. Ko Young-min, a researcher at Shinhan Investment Corp., said, "A sharp rebound in semiconductor stock prices both domestically and internationally was confirmed. While there were expectations related to increased AI investment, Nvidia's earnings announcement acted as an explosive trigger. Given the strength of the price rebound, the trigger was necessary, but the conditions for an industry rebound were already sufficiently met."

Semiconductor Rally Continues VS Short-term Price Pullback

With semiconductors showing strength for the first time in a while, attention is focused on whether this rally can continue. While some forecasts suggest no correction considering the industry improvement in the second half, others warn of a possible short-term price pullback due to price burdens.

The second quarter average selling price (ASP) is seen as a milestone that will determine the direction of semiconductor stock prices. Researcher Ko explained, "Unlike in past cycles, this time the ASP rebound of manufacturers will precede the rebound in spot prices of main products. If the DRAM ASP is confirmed to be better than expected despite manufacturers' push-outs in the second quarter, it could give investors confidence in the DDR5 effect and the cycle rebound, making the second quarter ASP an important milestone."

Considering the industry improvement in the second half, some expect no correction. Kim Dong-won, a researcher at KB Securities, said, "From July, DRAM demand is expected to exceed supply, and Samsung Electronics' production cut effects will be fully reflected in supply and demand from August to September. Semiconductor supply-demand improvement will become visible from the second half." He added, "Despite recent price increases, semiconductor stocks still trade below their historical average price-to-book ratios (PBR) and show price attractiveness. Samsung Electronics and SK Hynix stock prices are expected to have higher lows toward the end of the year, and no waiting correction will occur."

However, the possibility of a price pullback due to short-term price surges is also raised. Park Yoo-ak, a researcher at Kiwoom Securities, said, "Total server market demand this year is expected to decrease by 3% year-on-year to 13.8 million units, with downward revisions from previous forecasts. While demand for high-capacity DDR5 is positive, demand for DDR4, which accounts for most DRAM sales, is worsening. Since the shipment share of high-capacity DDR5 is still only about 1%, the current short-term price surge is a burden, and a short-term price pullback is likely amid weaker-than-expected sales."