Analysis: Excessive Weight of Chip Stocks Pushes Korean Stock Market into Danger Zone

ME News, June 30 (UTC+8): the global AI boom has pushed both Samsung Electronics and SK Hynix’s shares to record highs this year, but this rally has also exposed the structural fragility of the Korean stock market, which isn’t accustomed to sharp swings. The combined weight of SK Hynix and Samsung in the Korea KOSPI index is now at a record 60%, compared with about 40% two years ago. Last week, after a steep drop in the stock market, regulators stepped in twice to suspend KOSPI trading in an effort to stabilize market confidence. Plans to roll out large-cap stock options, including those for SK Hynix, have been delayed. One concern is that retail investors are borrowing money to buy shares of Samsung and SK Hynix. This could put retail investors at risk of margin calls—when, if the share price falls below a certain level, brokers require investors to post additional cash. Excessive concentration of market risk in just two stocks may also prompt institutional investors to pull back, thereby amplifying downward pressure on share prices.

Mathieu Rachet, Head of Equity Research at Baosheng, said that recent market moves are an important reminder of concentration risk. When investors’ positions become overcrowded, periods of high volatility should be expected. (Source: BlockBeats)