"Not Yet at the Tipping Point... But Risk Management Must Continue" [Click e-Stock]

Rising Volatility Centered on Semiconductor Stocks

Volatility in both domestic and global stock markets is increasing, centering on semiconductor stocks. As speculative funds are flowing into the stock market much faster than in the past, analysts stress the need to maintain risk management and remain prepared.

On June 24, KB Securities emphasized the importance of risk management. The Korean stock market, which has a high proportion of memory semiconductor stocks, experienced significant fluctuations, while semiconductor stocks such as Micron Technology also plunged in the U.S. market. As the KOSPI fell by nearly 10% in a single day, it is assessed that investor sentiment toward artificial intelligence (AI)-related stocks worldwide has weakened.

Over the past several months, the KOSPI index has shown a strong upward trend, making it possible for investors to take on more speculative behavior, such as actively using loans or leveraged exchange-traded funds (ETFs). Similar trends are seen in Taiwan. Over the past 12 months, the amount borrowed by investors from securities firms to purchase stocks increased by 160%. Considering that this figure increased by 50% during the 12 months leading up to the collapse of the IT bubble in 2000, speculative funds are now flowing into the stock market at a much faster pace, even accounting for changes over time.

Stock prices typically rise when buying momentum outweighs selling pressure. KB Securities analyzed that as more investors believe that long-term industry growth expectations and long-term stock price uptrends are aligned and that simply participating in the market guarantees profits, excessive borrowing tends to deplete available buying power. This consistent pattern was observed during the IT bubble in 2000, the 2008 financial crisis, and the post-COVID-19 market crash in 2022.

Given these factors, some analysts say that there is still remaining buying power in the U.S. market. Ilhyuk Kim, a researcher at KB Securities, explained, "As of May this year, the year-on-year change in margin loan balances in the U.S. was 53.7%, which is below the 60% benchmark set in three previous cases. Considering that margin loan balances have risen rapidly since May last year, there is a possibility that the figure may not exceed 60% for a while."

Nonetheless, he emphasized that risk management should be strengthened given the heightened volatility. Recently, the cycle of sharp declines in semiconductor stocks has shortened, and if news emerges that dims long-term growth expectations, stock prices may not recover. In addition, a worsening funding environment due to rising interest rates, concerns about profitability stemming from competition among AI model developers to lower token prices, and weakened expectations for share buybacks are cited as further negative factors. Kim stated, "While maintaining our view to increase semiconductor exposure, we recommend reducing positions in on-device AI-related stocks and power infrastructure-related stocks as a strategy."

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