The KOSPI broke through the 7,000 level to notch a record high, but some say the gap with what individual investors feel is wide. As the "crowded market" continues, with the index gains concentrated in a few large semiconductor stocks such as Samsung Electronics and SK hynix, a sense of deprivation is growing among individual investors, who tend to hold a higher share of small and mid-cap stocks, that they are not feeling the returns.
As the KOSPI broke through 5,000 and 6,000 in succession this year, showing an unprecedented upward trend, individual investors are belatedly returning to the market. It is seen as driven by a strong "FOMO (fear of missing out)" mentality, fearing being left out of a record rally.
The problem is that the inflows are not spreading across the market but are being funneled into specific large-cap stocks. This year, the No. 1 net buy by individual investors was Samsung Electronics, with a total of 16.696 trillion won purchased. SK hynix also ranked near the top with net purchases of 6.6951 trillion won.
Of the 1,099 trillion won total bought by individuals in the main board this year, as much as 279 trillion won (25.4%)—about a quarter—was concentrated in just two stocks, Samsung Electronics and SK hynix. The indicators confirm an extreme "crowding" phenomenon in which retail money is flocking to a handful of names.
This trend is widening the gap between the index and perceived returns. The KOSPI has set a record high, but gainers are very limited, and a considerable number of stocks remain stuck in a range. In fact, on this day on the main board, the number of advancing stocks was only about 190, while decliners numbered about 690.
As a result, some investors voice complaints that "the perceived index is still around the 3,000 level." A college student surnamed Lee, 24, said, "The index keeps rising, but the stocks I hold don't move much, so the disconnect feels big," adding, "In the end, it seems only large caps have gone up, so I feel needlessly left out."
Not a few are actually more hesitant to invest because of the index's surge. An office worker surnamed Kim, 29, said, "It's become burdensome to invest just by looking at the index," adding, "I'm torn about whether to chase now or wait for other stocks."
Listed companies' earnings also show pronounced semiconductor crowding. Of the 122 trillion won in first-quarter consolidated operating profit for listed companies this year, Samsung Electronics and SK hynix accounted for about 77% (94.8431 trillion won), confirming a structure in which results are concentrated in a few corporations.
The market-cap share of the two corporations on the main board is also increasing. Based on the closing price on the 4th, Samsung Electronics (1,359.2598 trillion won) and SK hynix (1,031.2803 trillion won) together accounted for 42.04% of the total market capitalization (5,685.8042 trillion won) of KOSPI-listed companies. That is close to a 7% rise from 35.22% when the KOSPI was at the 4,200 level early this year.
Cho Joon-gi, a researcher at SK Securities, said, "While the earnings momentum in the domestic stock market is said to be good, excluding these two stocks, KOSPI operating profit estimates for this year and next are moving sideways over the long term," adding, "In the KOSPI's overall operating profit estimates for this year and next, Samsung Electronics and SK hynix together are approaching a 70% share, leaving the market highly dependent on semiconductors."
Such a crowded market is cited as a factor that could increase future volatility. The higher the dependence on specific stocks, the more the entire index can be shaken if those stocks undergo a price correction.
Experts stress that for the KOSPI's upward trend to continue, supply and demand must broaden across stocks. Sector rotation and whether small and mid caps rebound are cited as key variables that will shape the market's path.
Lee Sang-yeon, a researcher at Shinyoung Securities, noted, "With much of the earnings expectations already priced in, in the short term it's necessary to consider the possibility of a correction stemming from profit-taking," adding, "From a macro perspective, the burden of high oil prices and the resulting inflation has not been fully resolved."