Hyundai Motor Securities analyst Kim Jung-won issued a report on the 9th analyzing semiconductor sector peak-out concerns and foreign investor selling patterns affecting Korean stocks. The report found that memory semiconductor prices and KOSPI earnings forecasts have not yet shown peak-out signals despite recent market volatility. Kim stated that whether Q2 earnings season sustains upward estimate revisions will be a core variable for July market resilience. The analysis comes as foreign selling and semiconductor valuation concerns have increased volatility in Korean equities, though underlying earnings momentum remains intact according to the firm's data.
Memory Semiconductor Prices Rose Across Categories in June
According to Hyundai Motor Securities, memory semiconductor prices increased in both spot and contract markets during June. DDR4 8Gb spot prices rose 8.1% month-over-month while contract prices increased 5.0%. DDR5 16Gb spot prices climbed 11.8% with contract prices up 2.0%. NAND 64Gb prices showed the steepest gains, with spot prices jumping 33.8% and contract prices rising 11.5%. The report noted that contract price increases typically follow spot price surges, suggesting the semiconductor sector's earnings estimate upward trend may continue into Q3.
KOSPI Earnings Forecasts Continued Upward Revisions
KOSPI earnings outlook has not deteriorated despite recent index declines, according to the report. KOSPI 12-month forward earnings per share (EPS) rose 213.2% since last September and increased approximately 14.0% since early June. The report stated that earnings forecast damage has been limited despite the recent sharp index drop. Q2 KOSPI operating profit estimates have been revised upward 118.9% since the start of the year and 52.2% since the end of March. The semiconductor sector's Q2 operating profit estimates increased 255.3% since year-start, while 12-month forward EPS rose 354.2%. Year-to-date, the semiconductor sector's 12-month forward return on equity (ROE) surged from 20.4% to 45.2%.
Foreign Investor Selling Attributed to Profit-Taking and Index Rebalancing
Kim analyzed that recent foreign selling resulted from active profit-taking amid semiconductor peak-out concerns and Iran war uncertainty. The report identified an additional factor: passive selling pressure from semi-annual rebalancing as Korea's weight in emerging market (EM) indexes increased. Hyundai Motor Securities calculated that Korea's weight in EM indexes rose from approximately 11% last November to 23.1% at the end of May due to Korean stock market gains in June. Kim stated that while foreign selling may continue in the short term, passive mechanical selling pressure is expected to gradually ease after the active selling phase subsides.
Hyundai Motor Securities Recommends Semiconductors as Top Sector
The report maintained semiconductors as the top preferred sector, noting that earnings strength improvement has outpaced stock price gains despite the sector's significant year-to-date rally. The chemicals sector was identified as a candidate for earnings-confirmation-driven rebound, with Q2 operating profit estimates up 27.0% since year-start and 12-month forward EPS up 15.1%. Kim assessed that the chemicals sector is still in the early stage of consensus upward revisions. The shipbuilding sector was classified as a complementary sector rather than a core leading sector, despite maintained strength in commercial vessel and LNG carrier orders. The report noted that Hanwha Ocean's event option disappeared after Germany's ThyssenKrupp Marine Systems (TKMS) was selected for Canada's submarine project. For the securities sector, Kim stated that trading volume recovery and ROE re-acceleration confirmation are needed for further revaluation.
FAQ
What did Hyundai Motor Securities analyst Kim Jung-won say about Korean stocks earnings outlook on the 9th?
Kim Jung-won stated in a report issued on the 9th that memory semiconductor prices and KOSPI earnings forecasts have not yet shown peak-out signals despite recent market volatility. He identified whether Q2 earnings season sustains upward estimate revisions as a core variable for July market resilience.
How much did memory semiconductor prices increase in June according to the report?
According to Hyundai Motor Securities, DDR4 8Gb spot prices rose 8.1% month-over-month in June while contract prices increased 5.0%. DDR5 16Gb spot prices climbed 11.8% with contract prices up 2.0%. NAND 64Gb prices showed spot price gains of 33.8% and contract price increases of 11.5%.
Why did foreign investors sell Korean stocks according to Hyundai Motor Securities?
The report attributed foreign selling to active profit-taking amid semiconductor peak-out concerns and Iran war uncertainty, combined with passive selling pressure from semi-annual rebalancing. Korea's weight in emerging market indexes rose from approximately 11% last November to 23.1% at the end of May, triggering mechanical rebalancing-related sales.
