Dealers work at the trading room of Hana Bank's headquarters in Seoul on Friday, as the Kospi closed at 6,258.77, down 37.61 points, or 0.60 percent, from the previous session. [Yonhap]
Dealers work at the trading room of Hana Bank's headquarters in Seoul on Friday, as the Kospi closed at 6,258.77, down 37.61 points, or 0.60 percent, from the previous session. [Yonhap]

A sharp selloff in large-cap semiconductor stocks this month has wiped about 375 trillion won ($264 billion) off the combined market capitalization of Samsung Group and SK Group — the only two among the top 10 conglomerates by market cap to post a decline.

Korea Exchange data released Friday showed Samsung Group's market cap fell 198.23 trillion won, or 9.45 percent, from July 31 to 1,900.43 trillion won. SK Group shed 176.64 trillion won, or 11.82 percent, over the same period to stand at 1,317.72 trillion won. Together, the two groups lost 374.86 trillion won in market value.

The declines were driven primarily by steep share price drops at their core semiconductor affiliates. Samsung Electronics fell 12.0 percent from its July 31 closing price, while SK hynix dropped 17.2 percent — more than double the Kospi's 5.3 percent decline over the same period — pulling down the overall enterprise value of both groups.

A rapid cooling of investor sentiment toward semiconductors also weighed on the stocks. Growing expectations that Chinese memory chip makers would expand production stoked fears of a future supply glut, and weakness in US AI semiconductor stocks compounded the selling pressure on domestic chip names.

"What the market is worried about is not that Chinese companies have already caught up with Samsung Electronics or SK hynix," said Lee Gyeong-min, an analyst at Daishin Securities. "The concern is that if they are able to produce more memory chips going forward, supply will increase and it may become difficult for memory chip prices to keep rising as they have been. That kind of worry has dampened investor sentiment across the semiconductor sector."

Leveraged exchange-traded funds were also identified as a factor that amplified volatility during the selloff.

"As semiconductor stocks fell, leveraged ETFs had no choice but to keep selling Samsung Electronics and SK hynix to rebalance their positions," said Jeong Hyeon-jong, an analyst at Korea Investment Securities. "That selling in turn destabilized share prices further, creating a feedback loop that drove volatility even higher."

Defense and nuclear power-related conglomerates, by contrast, continued to advance. Hanwha Group's market cap rose on the back of Hanwha Aerospace's record-high earnings and expectations for further overseas defense exports, while Doosan Group gained on optimism over Doosan Enerbility's nuclear power plant project expansion.

"The defense cycle is not over yet," said Yang Seung-yun, an analyst at Eugene Investment Securities. "Shipments to Poland, Egypt and Australia are set to continue in the second half of the year, so earnings growth is likely to be sustained."

"Nuclear power is no longer just a sector of expectations — actual contracts are being signed one by one," said Lee Sang-heon, an analyst at iM Securities. "New orders are likely to continue in the second half, and that momentum should have a positive effect on corporate valuations."

Investment flows are also rotating out of semiconductors and into other sectors. While chips led the market in the first half of the year, attention has recently broadened to industries with solid earnings backing, such as defense, nuclear power and power equipment.

"In the first half, semiconductors were the only thing going up — now the mood has shifted somewhat," said Seol Tae-hyeon, an analyst at DB Securities. "While semiconductors take a breather, money is moving into other sectors. In a market like this, stock selection matters more than broad market exposure."


kacew@heraldcorp.com