Following the implementation of supplementary regulations on single-stock leveraged exchange-traded funds (ETFs), the dominance of large-cap semiconductors is showing signs of easing. The upward trend led by Samsung Electronics and SK Hynix is now spreading to sectors such as construction, steel, machinery, and healthcare, indicating a shift towards sector rotation.
According to the Korea Exchange, from the implementation of the single-stock leveraged ETF regulations on July 31 to August 10, the top five KRX index fluctuations were KRX Construction (29.71%), KRX Machinery (26.06%), KRX 300 Information Technology (24.84%), KRX Steel (24.74%), and KRX 300 Healthcare (24.51%). This contrasts with the earlier performance where semiconductor and IT-related indices dominated returns, including the KRX SK Hynix Index (103.07%), KRX Samsung Electronics Index (72.64%), and KRX 300 Information Technology (58.32%) from the beginning of the year until July 30.
Trading in large-cap semiconductors has also decreased. From May 27, when the single-stock leveraged ETF was launched, until the day before the regulation took effect on July 30, the average daily trading volume for Samsung Electronics was 9.7263 trillion won, but it dropped to 6.9800 trillion won after the regulation, a decrease of 28.2%. Similarly, SK Hynix saw its trading volume fall from 13.5788 trillion won to 8.7841 trillion won, a 35.3% decline. The trading volume for both Samsung Electronics and SK Hynix decreased by 10.9% and 10.3%, respectively, indicating a moderation in the previously overheated semiconductor market.
Changes in overall market supply and demand are also evident. The KOSDAQ index has continued to rise since July 31, with only one day of decline. The investment sentiment, which had been concentrated in semiconductors, is now spreading to biotechnology, materials, and small- to mid-cap stocks, suggesting a rotation in investment. Analysts believe that the price adjustments in large-cap semiconductors and the new regulations on single-stock leveraged ETFs are leading to a redistribution of investment funds from previously favored stocks to relatively neglected sectors.
Jo Jung-ki, a researcher at SK Securities, stated, "While the weakness of leading semiconductor stocks and related equities continues, most other stocks are showing upward trends. This indicates a phase of easing concentration, where the overall index weakness does not detract from the significant improvement in individual stock trends, and sector rotation is quite pronounced." He added, "As sector rotation continues and the semiconductor sector's share of the KOSPI index naturally decreases, the recent extreme volatility in the index may structurally diminish."
However, some analysts caution that this does not signify the end of semiconductor strength. Instead, they view it as a process of finding balance among sectors as the previous concentration eases. Lee Kyung-min, a researcher at Daishin Securities, predicted, "After the easing of semiconductor supply concentration and volatility, semiconductors will re-establish themselves as leading stocks, accompanied by a rise in undervalued neglected stocks based on their performance."
* This article has been translated by AI.
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