"Semiconductors have fallen too much, and KOSDAQ is likely to normalize starting in September."
Director Kim Byung-yeon of the investment strategy department at NH Investment & Securities said at a Korea Exchange (KRX) press briefing on the 20th that while the semiconductor sector is undergoing an excessive correction in connection with the recent sharp drop in the domestic stock market, KOSDAQ needs to confirm policy momentum, so a full-fledged recovery is likely to begin after September.
Kim cited concerns about a semiconductor peak-out, U.S.-Iran tensions, and the rise of Chinese AI models as negatives surrounding the current market, but noted that current share prices have already priced in much of this.
He said, "If you assume SK hynix will not fall back into losses as in the past, a forward price-to-book ratio (PBR) of about 1.3–1.4 times is an appropriate rock bottom (lowest point)," adding, "Applied to the KOSPI, that is around 6,000 points."
He added, "Rather than staying at the 6,000 level for long, it will rebound to the low-to-mid 7,000s after a price adjustment, and as we confirm next week's big tech cloud revenue growth rate and capital expenditures (CAPEX), the market will gradually stabilize. However, above the mid-8,000s, profit-taking pressure could emerge."
Kim emphasized that when looking at the semiconductor sector now, we should focus on the "absolute scale of profits" rather than the "growth rate."
He said, "Because share prices reflect momentum, looking only at the growth rate can make it look like a peak-out," but added, "The levels of semiconductor export value and corporations' profits themselves have risen significantly compared with the past. We need to judge whether they will return to previous levels or whether a new level has formed."
On a price-earnings ratio (PER) basis, he assessed that the market has already entered a deeply undervalued zone that was rare even before the financial crisis. However, he explained that if you view semiconductors as the typical cyclical industry of the past, PER alone is hard to explain, and you also need to consider that profit stability has improved compared with the past due to expanding server demand and long-term supply contracts.
He was also less pessimistic about AI investment than market concerns suggest. Kim said, "What matters more than the continuity of investment is whether AI demand continues," adding, "Even if token efficiency improves, the use of external processors (CPUs) and general-purpose memory will increase, so memory demand is likely to keep growing."
He went on, "The most important factor in next week's big tech earnings is the cloud revenue growth rate," and assessed, "Because AI is a megatrend, it is unlikely that investment stances will change just because there is a one- to two-year financial burden."
He also said concerns about a semiconductor peak-out resemble the market's moves in March–April this year. He said, "At that time as well, Middle East risks and worries about slowing memory demand overlapped, but the market ultimately recovered," adding, "We should recall the learning effect from that period now, too."
He cautioned against excessive worry about supply-demand dynamics as well. Kim said, "Customer deposits remain around 100 trillion won, and securities firms have preemptively raised margin requirements, so the burden from forced liquidation is not large," adding, "Foreign investors have sold a lot of semiconductors, but their current equity ownership has fallen to levels similar to the past 'chicken game' period, so additional selling is likely to gradually ease."
By contrast, he expected KOSDAQ's recovery to be somewhat later than semiconductors.
Kim said, "In the United States, when semiconductors take a breather, rotation appears into other sectors, but in Korea, when semiconductors fall, other sectors fall together," adding, "KOSDAQ is currently under reinforced delisting requirements, and with policy schedules such as the second sale of the Public Growth Fund ahead, I think it will gain momentum and enter the normalization process around September."
Meanwhile, Kim assessed that the government's measures announced on the 16th to supplement single-stock leveraged ETFs are having some effect in easing market volatility. He said, "The biggest factor is the perception that the current index level is the bottom due to excessive price adjustments," while adding, "The supplementary measures released by the government are also contributing in part to market stability."