"No Damage to Semiconductor Industry; Strategy to Increase Weight in Leading Stocks Remains Valid"

Samsung Securities Report:
"Review and Outlook on the Stock Market Decline"

On June 8, the exchange rate, KOSPI, and KOSDAQ indices are displayed on the index status board in the dealing room of Hana Bank headquarters in Jung-gu, Seoul. 2026.06.08 Photo by Dongjoo Yoon

Although the domestic stock market experienced a sharp decline, analysts have indicated that this phenomenon is simply part of a cooling-off process following a period of overheating, rather than a deterioration of fundamentals.

On June 9, Samsung Securities explained in its report, "Review and Outlook on the Stock Market Decline," that the recent correction in the domestic market was not due to damaged fundamentals. Rather, the firm attributed the downturn to heightened sensitivity to negative news amid growing fatigue from previous market gains, which in turn led to increased profit-taking, especially in semiconductor-related stocks.

Regarding the specific reasons for the decline, the report first cited the surprise in U.S. employment data, which fueled concerns about interest rate hikes. In May, nonfarm payrolls increased by 172,000, far exceeding the market consensus of 88,000. This resulted in a sharp rise in interest rates as the market factored in the possibility of a rate hike by the U.S. Federal Reserve (Fed), leading to a significant drop in the indices.

However, the report pointed out that it may be unreasonable to interpret the latest employment data at face value. A closer look at the details shows that temporary employment gains occurred in leisure, hospitality, and government jobs due to the North and Central American World Cup and the Memorial Day holiday. Wage growth, when adjusted for inflation, remains at a moderate level, and the spread of energy price increases triggered by the Iran war appears limited. Therefore, the likelihood that the Fed will actually implement a rate hike based solely on this single employment indicator is considered low.

The second reason for the decline is concern over profitability amid heightened expectations for semiconductor performance and increased artificial intelligence (AI) investment by hyperscalers. Last week, Broadcom triggered a sell-off across the semiconductor sector after its profitability outlook fell short of consensus despite solid earnings. In addition, news that Meta is considering a large-scale paid-in capital increase following Alphabet's similar move has raised concerns about the capital expenditure burden and uncertainty over the timing of monetization among hyperscalers.

Finally, concerns related to supply and demand have added downward pressure on the market. The recent increase in margin balances and expansion of leveraged positions during the market rally have contributed to higher price volatility. The report also noted that the exchange rate has reached its highest level since the foreign exchange crisis, further heightening fears of additional foreign capital outflows. Additionally, with SpaceX's initial public offering (IPO) scheduled for this Friday, the report did not rule out the possibility that some investors' demand for liquidity may have led to profit-taking in leading stocks.

Join Cho, a researcher at Samsung Securities, emphasized, "We believe this correction is closer to a normalization of overheated positioning than any deterioration in the AI semiconductor industry." She added, "Earnings estimates for domestic companies continue to trend upward, and the recent decline has made Korean equities even more attractive in terms of valuation."

However, Cho also advised, "This week is packed with events that could heighten market volatility, including the release of the U.S. Consumer Price Index (CPI) for May, the simultaneous expiration of Korean futures and options (June 11), and the SpaceX IPO (June 12)." She suggested, "Rather than rushing to buy on dips, it is more appropriate to use the short-term volatility phase to increase exposure to AI-driven leading stocks."

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