Taiwan is home to TSMC, the world's largest foundry, which dominates the economy, accounting for 46% of the total market capitalization of the Taiwanese stock market. A similar concentration is raising concerns in South Korea, where the KOSPI index's reliance on 'Samsung-Hynix' (Samsung Electronics and SK Hynix) is causing fears of market polarization. Critics argue that the semiconductor sector is creating a misleading perception of overall market strength. However, supporters contend that the strong performance of these two companies justifies their stock price increases, and that sector concentration is not unique to South Korea.
◆ 'Samsung-Hynix' Approaches 50% of KOSPI Market Cap
On May 7, the KOSPI closed at 7,490.05, up 105.49 points (1.43%). The surge was driven by semiconductors, with Samsung Electronics reaching a record high of 277,000 won and SK Hynix hitting 1,665,000 won. Although both stocks later retraced some gains, their market influence remains significant.
Samsung Electronics and SK Hynix have market capitalizations of 1,587 trillion won and 1,179 trillion won, respectively, totaling 2,766 trillion won, or about 45.06% of the KOSPI. This is a slight decrease from 47% the previous day, but the KOSPI's direction is still heavily influenced by these two stocks. Their combined market cap has nearly doubled from about 462 trillion won (21.9% of KOSPI) a year ago, increasing to 1,184 trillion won (34.0%) by the end of last year, and maintaining 1,824 trillion won (38.2%) after the outbreak of conflict between the U.S., Israel, and Iran in early March.
Despite the market boom, concerns about the concentration of 'Samsung-Hynix' persist. While the semiconductor sector is driving the rally, a slowdown could lead to increased volatility across the market. Eugene Investment & Securities noted that excluding semiconductors, the KOSPI index would be around 4,100, indicating that most sectors are lagging behind the index's rise. Only one-third of the market is reaching new highs this year.
◆ "Sector Concentration is Not Unique to South Korea"
While the concentration in semiconductors is deepening, some analysts argue there is no cause for alarm. They point out that the stock prices of Samsung Electronics and SK Hynix are closely tied to their performance and are still considered undervalued. Domestic brokerages believe the memory sector's reevaluation is in its early stages, suggesting there is room for further growth. SK Securities raised its price targets for Samsung Electronics and SK Hynix to 500,000 won and 3 million won, respectively, while Mirae Asset Securities increased SK Hynix's target from 2 million won to 2.7 million won, a 35% hike.
The phenomenon of large tech stocks leading the market is not exclusive to South Korea. In the U.S., the so-called 'Magnificent Seven' (M7) tech giants are driving market gains. According to StockAnalysis, the total market cap of companies in the Nasdaq 100 is approximately $38.38 trillion, with the M7—NVIDIA, Alphabet, Apple, Microsoft, Amazon, Meta, and Tesla—accounting for $23.19 trillion, or 60.4% of the total.
* This article has been translated by AI.
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