Analysts said that in the domestic stock market, which has been undergoing a pullback after a peak, investors should expand exposure gradually in step with easing volatility rather than sharply cutting the share of risk assets. They advised a "barbell strategy" that focuses investment on semiconductors and information technology (IT) hardware while also holding defensive stocks such as telecommunications, consumer staples, and banks.
Lee Jeong-bin, a researcher at Shinhan Investment & Securities, said in a report on the 5th that "we are currently in a phase where volatility is moderating gradually rather than being resolved rapidly," and "a balanced portfolio that can respond flexibly to market conditions is needed rather than an all-out aggressive approach."
In the past, a decline in VKOSPI, the KOSPI 200 volatility index, alongside a rebound in the KOSPI was used as a signal of recovering risk appetite. But this year, the KOSPI rose even when VKOSPI hovered above 80 points and then maintained high volatility during the correction. The point is that it has become difficult to judge market direction based solely on the absolute level of the volatility index.
The shift in market structure was attributed to a concentration in artificial intelligence (AI) plays centered on Samsung Electronics and SK hynix. On June 25, the combined net asset value of single-stock leveraged exchange-traded funds (ETFs) on the two names expanded to 17.5 trillion won. Analysts said that concentrated flows into specific stocks, geopolitical risks, and changes in supply and demand for hedge funds and leveraged ETFs amplified market volatility.
Recently, with foreign selling pressure easing and trading value in single-stock leveraged ETFs shrinking, it was assessed that the pressure for further declines may subside. However, they saw a higher likelihood that volatility will decrease gradually rather than be resolved in a short period.
In major past crisis cases, after volatility eased, the KOSPI rose an average of 17.7% over six months and 39.0% over 12 months. However, rather than seeing an immediate V-shaped rebound, corrections and rebounds repeated; therefore, a strategy of scaling into risk assets rather than trying to call the market bottom proved effective.
The researcher said, "VKOSPI functions more as a timing signal for when to increase beta than as an indicator of what to buy," adding, "instead of overreacting to short-term swings, it is necessary to gradually increase the share of risk assets, taking into account earnings and market conditions."
In the early phase of volatility easing, high-beta sectors, whose stock moves exceed the market, delivered relatively strong performance. Currently, semiconductors and IT hardware, which have both high-beta characteristics and improving earnings, were cited as leading investment candidates. The 12-month forward earnings per share (EPS) for the semiconductor sector has been revised up 178.9% over the past six months.
The KOSPI's 12-month forward net profit was estimated at 916 trillion won, with Samsung Electronics and SK hynix accounting for 74.5% of the total. Even after second-quarter earnings releases, the two companies' net profit forecasts for this year rose by 4.5% and 8.4%, respectively.
However, they said defensive stocks should be held in parallel to brace for short-term volatility. The strategy is to keep semiconductor weights at the market level and slightly increase IT hardware, while also holding telecommunications services, consumer staples, automobiles, banks, and cosmetics.
The researcher said, "given geopolitical risks and shifts in supply and demand for leveraged ETFs, short-term volatility may persist for the time being," adding, "a barbell strategy that combines offense and defense is the most rational response."