"Don't Be Fooled by the Index Crash"..."Switch Here When Semiconductors Waver" [Weekend Money]

LS Securities: "Time to Seek Alternative Sectors Beyond Semiconductors"

In Korea: Banks, Secondary Batteries, Cosmetics, Entertainment, Construction, Shipbuilding, and More

In the US: Energy, Utilities, Real Estate, Healthcare, and Others

There have been claims that, as memory semiconductor stocks are fluctuating, it is time for investors to consider alternative areas for investment.

According to LS Securities on August 1, the KOSPI index has declined by approximately 40% from its peak, recording a drop comparable to past financial crisis events. However, analysts explain that this is a phenomenon caused by the decline in semiconductor stocks related to artificial intelligence (AI), while the stock prices of players outside the semiconductor sector remain solid.

LS Securities assessed this situation—where only the semiconductor sector and the Korean stock market are shaking—as both a relief and a risk factor. The reason it can be seen as a relief is that, in a broad sense, it signals that the AI cycle is still intact. LS Securities added that this suggests the possibility for semiconductors to establish a support level based on the definite investment merits such as shareholder returns and cash reserves.

On the other hand, the reason it is also a risk is that, because this correction has not spread into a crisis throughout the entire system, it is difficult to expect fiscal and monetary policy responses that could have been anticipated during past circuit breaker phases.

LS Securities also emphasized that now is the time to consider other investment destinations that can replace semiconductors. While most large-cap stocks in Korea have shown volatility linked to semiconductors, the brokerage diagnosed that banks and secondary battery stocks have demonstrated a relatively defensive stance.

Sanhae Hwang, a researcher at LS Securities, stated, "Sectors such as cosmetics, consumer staples, and entertainment, which tend to have a small average market cap and possess individual export momentum, have shown resilience even during a downturn in semiconductors. Industries like construction and transportation are also benefiting from expectations regarding the ongoing AI investment cycle—including projects like semiconductor facility (CAPA) expansion and data center construction—which remain independent of the semiconductor downturn." He added, "For shipbuilders, defense, machinery, automobiles, and even the KOSDAQ market, the overall declines have been excessive given the broad market volatility and supply-demand driven neglect."

In the U.S. stock market, sectors such as energy and utilities have been cited as alternatives to semiconductors. Hwang noted, "During periods when Micron's returns turned negative, areas like energy, utilities, real estate, healthcare, and consumer staples all maintained positive returns at meaningful rates. It's also noteworthy that, during the instability of the semiconductor supply advantage in July, device makers like Apple and hyperscalers demonstrated strong performance."

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