Semiconductor SoBuJang ETF Rally Expected to Continue This Month

20-30% Surge in a Month... SOL Semiconductor Front-End Process Leads Returns
Semiconductors "Samsungh Electronics and SK hynix" Scaled Back, SoBuJang Composition Boosted by Rebalancing
18 Trillion Won Rebalancing Set for This Month... Centered o

Over the past month, semiconductor materials, components, and equipment (also known as "So-Bu-Jang") related ETFs on the Korean exchange-traded fund (ETF) market have swept the top spots for returns, posting high yields in the range of 20% to 30%. This surge followed capital inflows into So-Bu-Jang stocks during the regular ETF rebalancing last month, which pushed share prices higher. Moreover, with another semiconductor ETF rebalancing—worth 18 trillion won—slated for this month, continued upward momentum driven by favorable supply-demand conditions is expected.

According to ETF Check on October 2, the SOL Semiconductor Front-End Process ETF jumped 32.45% over the past month, ranking first in returns among all domestically listed ETFs, excluding leveraged and inverse products. Other semiconductor process and So-Bu-Jang ETFs also saw gains of over 20%, making the list of top performers: HANARO Semiconductor Core Process Leaders (30.32%), SOL AI Semiconductor So-Bu-Jang (28.41%), KODEX AI Semiconductor Core Equipment (27.13%), and SOL Semiconductor Back-End Process (26.68%). During the same period, the KOSPI index increased by only about 1%.

This strong performance by So-Bu-Jang ETFs is attributed to capital inflows driven by last month's rebalancing of semiconductor ETFs. Last month, ETFs tracking the KRX Semiconductor Index—such as KODEX Semiconductor and TIGER Semiconductor—reduced their allocations to Samsung Electronics and SK hynix, which had exceeded the individual stock cap, and increased the weighting of So-Bu-Jang names such as Hanmi Semiconductor, Jusung Engineering, EO Technics, and DB HiTek.

Industry analysts expect this strong momentum for So-Bu-Jang ETFs to continue into this month. This is because another large-scale semiconductor ETF rebalancing is set to occur. According to Samsung Securities, the total size of ETFs subject to rebalancing in October is expected to reach 23.2 trillion won, with semiconductor-related ETFs accounting for 18.1 trillion won, representing the lion's share.

Due to Samsung Electronics exceeding the individual stock cap, capital is expected to shift away from Samsung Electronics and flow into So-Bu-Jang stocks. For example, Samsung Electronics makes up 27.1% of the 10 trillion won TIGER Semiconductor TOP10 ETF, surpassing the 25% cap by 2.1 percentage points. The SOL AI Semiconductor TOP2 Plus ETF, valued at over 5 trillion won, also has a Samsung Electronics weighting of 24.5%, approaching the cap. As a result, this rebalancing is expected to trigger selling of about 200 billion won worth of Samsung Electronics shares. Jeon Gyun, a researcher at Samsung Securities, explained, "To adjust for the cap on Samsung Electronics in these ETFs, supply of around 200 billion won worth of shares is expected. In addition, demand for inclusion of semiconductor So-Bu-Jang companies such as Hanmi Semiconductor, Jusung Engineering, ISU Petasys, and Wonik IPS is projected to increase by roughly 20 billion won each as the weight of Samsung Electronics is reduced."

On the other hand, SK hynix is currently below the cap, so capital inflows are expected. Jeon added, "Because SK hynix is underweight in most ETF allocations, it is likely to absorb some of the funds from Samsung Electronics' cap-related selling. Additional purchase demand of about 90 billion won is expected for SK hynix, while SK Square is forecast to see additional buying demand of about 80 billion won."

Meanwhile, since this month’s ETF rebalancing is expected to concentrate on October 8, the options expiration date, market participants should be cautious about increased volatility. Jeon noted, "Most ETFs conducting rebalancing this month are scheduled to do so on the business day following the October options expiry, or on the first business day of the following week. Considering the holiday schedule in October, actual rebalancing is likely to concentrate on October 8, which could cause market volatility due to supply-demand imbalances on that day."

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