[Good Morning Markets] Weakness in U.S. Semiconductor Index... Sector Rotation Expected

Fatigue Over Semiconductor Concentration in the U.S. Stock Market
Philadelphia Semiconductor Index Falls 1.36%
Concerns Rise Over Excessive Focus on Leading Stocks in Korea

Yonhap News

On May 28, the KOSPI is expected to experience sector rotation, as a result of a sharp drop in international oil prices, a rebound in the New York stock market, and weakness in the Philadelphia Semiconductor Index.

In the previous trading session, the Dow Jones Industrial Average closed at 50,644.28, up 182.60 points (0.36%). The S&P 500 Index finished at 7,520.36, up 1.24 points (0.02%) from the previous session, while the tech-heavy Nasdaq Index rose 18.55 points (0.07%) to close at 26,674.73.

Negotiations between the United States and Iran, which have recently become a key variable in the global financial markets, continue to be mired in confusion. Iranian media reported that the United States and Iran have drafted a memorandum of understanding (MOU) containing a 60-day ceasefire proposal, but the U.S. side has denied this. U.S. President Donald Trump also expressed dissatisfaction with the negotiations, indicating that conflicts remain over the nuclear uranium issue, the Strait of Hormuz, and economic sanctions.

However, the market is placing more weight on the possibility of an end to the conflict than on geopolitical tensions. West Texas Intermediate (WTI) crude oil prices plunged more than 5% in a single day, falling below $90 per barrel, and the rise in U.S. Treasury yields was also limited.

There is also a sense of fatigue within the New York stock market regarding the concentration of funds in the semiconductor sector. While Micron continued its rally, major semiconductor stocks such as Nvidia and AMD weakened, and funds rotated into consumer discretionary and consumer staples sectors. As a result, the Dow Jones showed relatively stronger performance.

Han Ji-young, a researcher at Kiwoom Securities, stated, "This indicates that the current market is experiencing short-term fatigue from the dominance of leading stocks in artificial intelligence (AI) and semiconductors," and added, "During the remainder of the week, as the market digests external events such as the U.S.-Iran negotiations and the April personal consumption expenditures (PCE) price index, it is necessary to be open to the possibility of a temporary pause in the rally of leading stocks."

The domestic stock market also saw an extreme concentration in semiconductor stocks. In the previous session, the KOSPI surged more than 2%, driven by a sharp rise in Micron in the U.S. and falling U.S. Treasury yields, as foreign and leveraged funds focused on Samsung Electronics and SK hynix. In contrast, the KOSDAQ weakened as investors took profits.

In fact, about 90% of the total trading value in the domestic stock market the previous day was concentrated in Samsung Electronics and SK hynix. While the preference for the semiconductor sector amid the full-fledged AI investment cycle is natural, concerns have been raised that the excessive short-term concentration could increase volatility.

The researcher advised, "In the short term, the burden of this concentration may lead to short-term profit-taking and increased volatility, so it is necessary to be prepared for this. If, as seen yesterday, there is another outflow of funds from non-semiconductor sectors such as defense, shipbuilding, securities, and retail, unrelated to fundamentals, it may be an opportunity to consider new purchases."

This content was produced with the assistance of AI translation services.