The concentration in semiconductor heavyweights such as Samsung Electronics (005930.KS) and SK hynix (000660.KS) on Korea's stock market is reaching an extreme. With 83% of the KOSPI's total trading value concentrated in the two stocks and their single-stock leverage products, analysts say the structural vulnerability of the entire index rising and falling with the two stocks is becoming increasingly evident.
According to the Korea Exchange (KRX) on the 9th, trading value for Samsung Electronics and SK hynix on the 8th reached 9.5563 trillion won and 15.2560 trillion won, respectively, accounting for 51% of the combined KOSPI and KOSDAQ trading value of 48.6090 trillion won that day. This is up 21 percentage points from 30% on May 26, the day before single-stock leverage and inverse products were listed, in just a month and a half.
Adding in the 15.6045 trillion won in trading value from the 16 single-stock leverage and inverse products as of the 8th, the share held by Samsung Electronics and SK hynix shares and their related leverage products on the domestic market soars to 83.1%. Even accounting for the fact that exchange-traded fund (ETF) trading value is not captured in the KOSPI and KOSDAQ trading value tallies, the influence of the two heavyweights has grown much more steeply since the introduction of single-stock leverage.
The concentration is being reflected in the index's movements. When Samsung Electronics and SK hynix plunged 6.92% and 6.06%, respectively, on the 7th, the KOSPI also closed down 4.91% at 7,656.31. On the 8th, as the two stocks fell 6.25% and 5.68%, the KOSPI likewise plunged 5.35% to sink to 7,246.79. In effect, the declines of the two stocks determined the decline of the entire KOSPI.
Concentration is also detected in securities lending balances, a leading indicator of short selling. On May 26, of the total securities lending balance of 147.9867 trillion won, the shares held by Samsung Electronics and SK hynix stood at 15.9% and 16.2%, respectively. But on the 8th, even as the total balance shrank to 134.6574 trillion won, the two stocks' shares rose to 17.4% and 21.5%. In particular, SK hynix's securities lending balance grew by more than 5 trillion won, pushing the two stocks' combined share up from 32.1% to 38.9%, nearing 40%. While securities lending volume across the entire market declined, the volume of short-selling awaiting the two stocks actually grew.
Concerns are also mounting. In a written response submitted to People Power Party lawmaker Park Sung-hoon's office on the 5th, the Bank of Korea (BOK) said that with the two stocks' market capitalization and trading share already surpassing half of the market, the expansion of single-stock leverage could intensify the concentration. The Financial Supervisory Service (FSS) also held a consumer risk response council meeting on the 6th, deciding to continuously monitor the market impact of single-stock leverage and to inspect asset managers for excessive marketing if necessary.
However, some assessments suggest signs that the concentration may ease somewhat as the market goes through its recent correction phase. Kang Jin-hyuk, a researcher at Shinhan Securities, noted that amid a trend of easing large-cap concentration, sector rotation is emerging between semiconductor and non-semiconductor names, and that sectors with strong earnings momentum such as banks, cosmetics, and retail have held up well. Kim Yong-koo, a researcher at Yuanta Securities, projected, "As the political sphere continues to point out the supply-demand concentration issue of single-stock leverage, if institutional improvements such as strengthened trading management, disparity-rate regulation, and raising barriers to entry for investors are implemented together, there is room for the concentration among individual investors to disperse as well."
