Semiconductor materials, parts and equipment stocks surge

Analysts say rally unlikely to last

Share price indexes are displayed at the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, on Wednesday. [Yonhap]
Share price indexes are displayed at the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, on Wednesday. [Yonhap]

The Kosdaq has risen 4.24 percent this month, moving in sharp contrast to the Kospi, which has fallen 3.1 percent over the same period. A surge in semiconductor materials, parts and equipment stocks, along with rising trading volume, has helped prop up the smaller-cap market.

Analysts warn, however, that a return to the 1,000-point mark is unlikely without a meaningful improvement in the underlying fundamentals of listed companies.

The Kosdaq has gained 4.24 percent so far this month, according to Yonhap. After surrendering the 1,000-point level in June, the index slid as low as the 600s in late July before gradually recovering. On Tuesday, it closed above 900 for the first time in roughly three months.

The index slipped back below 900 as caution spread across the broader market around Samsung Electronics' third-quarter earnings release on Thursday, but it has still held up better than the Kospi.

The Kosdaq posted monthly gains of 15.91 percent in August and 2.59 percent in September. The Kospi, by comparison, rose just 3.4 percent in August and 0.26 percent in September, and has fallen 3.1 percent this month.

The Kosdaq's relative resilience is largely attributable to a rally in semiconductor materials, parts and equipment stocks. From August, when the Kosdaq turned positive on a monthly basis, through Thursday, Jusung Engineering surged 114.86 percent. Other semiconductor-related names also posted sharp gains — SFA Semicon rose 137.78 percent, PSK Holdings 114.21 percent and HPSP 86.71 percent.

Trading volume, a key gauge of market sentiment, also tells a more encouraging story for the Kosdaq. The daily average trading value on the Kosdaq this month stands at 8.69 trillion won ($6.49 billion), up from 5.99 trillion won in August and 7.07 trillion won last month.

On the Kospi, by contrast, daily average trading value has been on a declining trend — falling from 25.85 trillion won in August to 21.36 trillion won last month and 19.84 trillion won this month.

Still, many analysts say the Kosdaq's strength does not reflect a genuine improvement in listed companies' fundamentals, making a sustained rally back to 1,000 unlikely.

"In terms of supply and demand, foreign investors are absent and retail investors are sitting on the sidelines, so the general trend lately has been to favor lighter, more nimble stocks over heavyweight names like large-caps," said Kim Jae-seung, a researcher at Hyundai Motor Securities. "Against that backdrop, interest seems to have grown in semiconductor materials, parts and equipment stocks, which were relatively left out of the semiconductor rally in the first half of the year."

He added, however, that the trend was unlikely to last. "The fundamentals — meaning earnings and investor sentiment — haven't changed," he said.

Heo Jae-hwan, a researcher at Eugene Investment & Securities, said the Kosdaq could outperform the Kospi for much of the fourth quarter. "Foreign investors are not actively buying into the Korean market, and retail investors — who at least have some capital available and can buy on dips — are becoming more prominent, which tends to favor the Kosdaq," he said.

Some analysts also note that a challenging investment environment, marked by elevated interest rates, makes it difficult for enthusiasm around semiconductor-related stocks to spread to other sectors.

"With interest rates as high as they are, it does seem to weigh on small- and mid-cap stocks," Heo said.


kimstar@heraldcorp.com