[Interview] Samsung Electronics, SK hynix Have Strong Fundamentals... 'Monthly Distribution Covered Call' an Alternative in a Sideways Market

Staggered Buying Recommended... Foreign Inflows to Resume Early Next Year
Watch for Rotational Buying Across the AI Value Chain, Including Power Equipment and ESS

"When volatility rises, rather than reacting to every price fluctuation, investors should check the 'fundamentals' of the companies at the heart of the matter. The underlying strength of Samsung Electronics and SK hynix remains intact."

Yook Donghwi, head of ETF Product Marketing at KB Asset Management, made the assessment of recent market conditions during an appearance on The Asia Business Daily's finance YouTube channel, Money Mani. "The earnings strength of major semiconductor companies remains solid. Given their long-term contract-based business models and the shortage of high-bandwidth memory (HBM), stock prices will return to their proper levels with a time lag once macroeconomic uncertainty eases," Yook emphasized.

"Now Is the Time to Buy the Index, Not Individual Stocks"

Yook attributed the recent weakness in domestic large-cap semiconductor stocks to a combination of a broad pullback across global memory hardware companies, including U.S. firms Micron and SanDisk, and the unwinding of overheated conditions following the index's sharp rise in the past.

Addressing concerns that China's ChangXin Memory Technologies (CXMT) is catching up in low-end DRAM technology, he said, "There is still a clear technology gap in high-value-added areas such as HBM, where Chinese companies are at least one generation behind." He added, "In the memory industry, mass-production yields and the ability to operate production lines are critical, so rather than being swayed by premature fears, investors should wait for concrete details, such as announcements about mass production at year-end."

In terms of investment strategy, he recommended that individual investors who already have a high allocation to semiconductors buy the broader KOSPI index rather than aggressively adding to individual stocks. "Even if you buy only a representative index such as the KOSPI 200, Samsung Electronics and SK hynix account for more than half of its market capitalization," Yook said. "At current index levels, it is a reasonable point to make an initial investment through staggered purchases or averaging down, rather than betting all your assets at once."

He added, "The won has strengthened despite recent foreign selling. This appears less like a complete exit from the domestic market and more like mechanical asset allocation by global funds and profit-taking following strong returns in the first half of the year." He said, "Once the earnings of major large-cap companies and macroeconomic indicators are known after year-end, inflows could resume at the start of next year."

As alternative investment sectors, he pointed to industries benefiting from rotational buying linked to AI infrastructure. "Within the AI cycle, power equipment and infrastructure tied to data center electricity demand, as well as secondary battery companies benefiting from energy storage systems (ESS), could offer opportunities for diversification," he said. "Domestic refiners are also worth watching, given their high export ratios and ability to maximize margins through advanced refining technology."

Covered Call ETFs Surge to 25 Trillion Won… Monthly Distributions and Reinvestment as Alternatives in a Sideways Market

As the stock market is increasingly likely to move sideways within a range for the time being rather than stage a V-shaped rebound, covered call exchange-traded funds (ETFs) are rapidly gaining popularity as an alternative product. The total net assets of covered call ETFs listed in Korea have recently grown to around 25 trillion won.

Yook explained the structure of the covered call strategy by comparing it to a real estate sales contract. "Suppose you own an apartment worth 1 billion won and, in exchange for giving a buyer the right to purchase it for 1.1 billion won a year later (a call option), you receive 50 million won upfront as a deposit (the option premium)," he said. "Even if the home price moves sideways or falls slightly, the premium received helps cushion losses, and the money is paid to investors as a source of monthly distributions."

In the past, covered call products had the limitation of capping returns at a certain level when stock prices rose. But, he said, products launched recently have undergone technical advances. "Many target-premium and fixed covered call products have emerged that split call option sales into weekly or daily cycles and sell options on only a portion, such as 10-30%, of the underlying assets rather than the entire portfolio," he said. "They are designed to secure monthly distributions while leaving room for 70-90% participation in a rising market."

Yook advised investors to choose products based on their investment objectives. "Target-based products with high distribution rates are suitable for investors who urgently need a steady monthly cash flow, such as retirees. But investors seeking to grow their assets over the medium to long term should choose products with greater potential for principal appreciation, even if their monthly distribution rates are somewhat lower," he said. "In the recent downturn, more savvy retail investors have also been using the monthly distributions they receive as a source of funds to reinvest when the index falls."

Finally, regarding investors' emotional discipline, Yook cautioned, "Checking your stock account every day to monitor price movements can lead to frequent trading and impulsive decisions, making it easy to lose money." He added, "The odds of success in short-term trading are low, so investors should focus on macroeconomic indicators and the earnings performance of major companies rather than price fluctuations themselves, and take a long-term view of the market."

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