Analysts say Korea's stock market is showing a pattern similar to Taiwan's past rally as a semiconductor surge led by Samsung Electronics and SK hynix draws in individual investors and exchange-traded fund (ETF) money. Even as foreigners keep selling on net, individual cash is propping up the market, and the ETF arena is expanding fast, making it look more like a Taiwan-style bull market.
On the 22nd, Daol Investment & Securities said in a report, "First-half KOSPI supply-demand check: a comparison with Taiwan's market phases," that the current structure of Korea's market upswing resembles Taiwan's bull markets since the 1980s–1990s. The report cited as this year's drivers: ▲ improvements in the semiconductor cycle thanks to the expansion of the artificial intelligence (AI) industry ▲ a market-cap concentration centered on Samsung Electronics and SK hynix ▲ increased flows led by individual investors and ETFs.
Semiconductors have in fact gained much more influence in Korea's market than in the past. According to the report, the semiconductor sector's share of market capitalization within the KOSPI has climbed to about 50%. The KOSPI's rise is effectively being led by Samsung Electronics and SK hynix. A substantial portion of this year's annual KOSPI gains came from the two stocks, which the report said mirrors how TSMC drove the index higher in Taiwan in the past. In Taiwan as well, as the semiconductor industry grew, TSMC's weighting in the index expanded rapidly, extending a long bull market.
Analysts also say changes in the supply-demand structure resemble Taiwan's. This year, foreigners have continued heavy net selling in Korea's market, but individual investors and ETF money have absorbed it and defended the index. According to the report, net purchases of stocks and ETFs by Korean individual investors are rising quickly, and ETF market assets under management (AUM) are climbing steeply.
The ETF market's growth, in particular, stands out. AUM for Korea equity ETFs surpassed 215 trillion won this year, and money continues to flow into leveraged and semiconductor ETFs. The report said individuals are increasingly using ETFs rather than single stocks to participate in the market.
Taiwan likewise saw individual money lead the market higher after its ETF market grew. According to the report, Taiwan's ETF market expanded rapidly after 2018, and since 2020, inflows into equity ETFs have surged, led by individual investors. In particular, semiconductor and high-dividend ETFs powered the market's rise.
The trend of stocks rising despite foreign selling is also seen as similar to Taiwan's case. The report said that in Taiwan in recent years, even as foreigners kept up net selling, individual and institutional money absorbed it and the index climbed. Korea's market is now shifting toward a similar structure.
Daol Investment & Securities said further upside for the KOSPI is possible if earnings at Samsung Electronics and SK hynix continue to improve and if the ETF market keeps expanding. Applying Taiwan's example, the report said the KOSPI could even reach 10,000 points if profit growth in the semiconductor sector and an expansion of valuation (price relative to earnings) occur simultaneously.
However, given the market's semiconductor-centric nature, greater volatility is cited as a potential variable. The report said that because the current KOSPI rise is concentrated in a few large-cap semiconductor names, any deepening of sector concentration could also widen the pullback.
Kim Ji-hyeon, a researcher at Daol Investment & Securities, said, "Since the start of this year, the rally has continued on corporations' earnings and individual investor flows," but added, "For the rally to hold, the concentration on a handful of stocks needs to spread across the broader market."