The South Korean stock market continues its strong rally, driven by semiconductor stocks, with the KOSPI nearing the 8500 mark. Expectations surrounding artificial intelligence (AI) semiconductors from Samsung Electronics and SK Hynix have boosted the market. However, the recent launch of single-stock leveraged exchange-traded funds (ETFs) has intensified market volatility due to concentrated supply and demand. Analysts are closely watching next week’s Nvidia annual AI conference, ‘GTC Taipei 2026,’ and U.S. employment data to gauge the sustainability of the semiconductor rally and the potential for sector rotation.
According to the Korea Exchange, the KOSPI index rose by 290.86 points (3.55%) to close at 8476.15 on the previous trading day. Over the week from May 26 to May 29, the KOSPI increased by 8.01%, while the KOSDAQ fell by 7.43%.
This week, the domestic market has seen a pronounced concentration of supply and demand in the semiconductor sector. With the easing of strike risks following a tentative agreement between Samsung Electronics and its labor union, UBS raised its price target for Micron from $535 to $1625, significantly improving investor sentiment in the global memory sector. Additionally, the launch of single-stock leveraged ETFs for Samsung Electronics and SK Hynix has attracted individual investors to large-cap semiconductor stocks, driving the index higher.
As of May 27, Samsung Electronics and SK Hynix accounted for 52% of the KOSPI’s market capitalization. In contrast, existing semiconductor ETFs and KOSDAQ semiconductor stocks experienced capital outflows, contributing to the KOSDAQ's decline. Analysts attribute the widening performance gap between the KOSPI and KOSDAQ to this concentration in semiconductor stocks.
Shin Eol, a researcher at Sangsangin Securities, noted, “Since May, the KOSPI has shown a coupling effect when semiconductors decline and a decoupling effect when they rise. The ADR indicator, which reflects the number of rising and falling stocks in the market, has dropped to 55%, below the recognized floor of 75%. The VKOSPI, which indicates market volatility, has also surpassed 70 points again in May, indicating a significant level of volatility compared to the typical 30-point increase seen in expanded volatility phases.”
He added, “Given the current environment where buying and selling are crossing paths, and investor sentiment remains somewhat unstable, it is advisable to be cautious about short-term profit-taking on individual stocks.”
Geopolitical risks in the Middle East appear to be easing. President Donald Trump mentioned on social media that negotiations with Iran are progressing smoothly, and reports indicate that both sides are nearing a memorandum of understanding (MOU) that includes reopening the Strait of Hormuz, which has alleviated some upward pressure on oil prices. However, military clashes between U.S. forces and the Iranian Revolutionary Guard continue, maintaining market caution.
Next week, a global IT event and U.S. employment data are on the agenda. From June 1 to 4, Nvidia’s GTC Taipei 2026 will take place, featuring a keynote address by CEO Jensen Huang, with AI chips, agentic AI, and physical AI expected to be key topics. Samsung Electronics and SK Hynix are also anticipated to highlight their collaboration on high-bandwidth memory (HBM) during the event.
The domestic market will be closed on June 3 for the 9th nationwide local elections. On June 5, the U.S. is set to release data on non-farm payrolls, unemployment rates, and average hourly earnings for May. The market expects an increase of 95,000 jobs and an unemployment rate of 4.3%.
Jo Byeong-hyeon, a researcher at Daol Investment & Securities, stated, “The market interest rates seem to already reflect concerns about oil prices and inflation, along with a hawkish Federal Reserve stance. Therefore, employment data that slightly falls short of expectations could be interpreted positively. However, if the data deviates significantly from expectations, it may act as a factor of volatility.”
Analysts are leaning towards the likelihood of a continued semiconductor-led rally in the short term. However, given the excessive concentration of supply and demand in the semiconductor and IT hardware sectors during May’s market surge, there are discussions about the potential for sector rotation towards industries with improved earnings, such as secondary batteries, shipbuilding, defense, and securities in June.
Lee Jae-won, a researcher at Yuanta Securities, remarked, “In May, the speed of stock price increases was rapid, largely influenced by the expansion of price-to-earnings ratios (PER) and the effects of leveraged ETF supply. In June, there is a possibility of sector rotation towards industries with improved earnings per share (EPS) outside of IT.” He emphasized, “The key is not the departure of leading stocks but the maintenance of leadership while expanding into other sectors.”
Jo added, “In the short term, with upward pressures on oil prices and interest rates easing, we can expect some recovery in the relative strength of the KOSDAQ and sector rotation. However, since we are not in a phase of declining interest rates, the choices will still narrow down to industries within the AI value chain that can outpace interest rate pressures.”
* This article has been translated by AI.
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