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Samsung Electronics, SK Hynix Weight in Korean Equities Swells to Record 60%; G Sachs: Mkt Swings Derailed from Corporate Fundamentals
2026-06-29 17:09:24 The South Korean stock market has experienced wild swings recently, with circuit breaker triggered five times so far this year. The Korea Exchange has postponed the launch of weekly options products linked to four heavyweight stocks, including Samsung Electronics and SK Hynix. Since the start of this year, about one-fifth of trading days in the MSCI Korea Index have marked single-day moves exceeding 5%, The Wall Street Journal reported. Mathieu Racheter, head of equity research at Julius Baer, said recent market movements have sounded an important alarm over concentration risk. When investor positioning becomes excessively crowded, markets inevitably enter periods of heightened volatility. Retail investors have borrowed funds to buy shares of the two major index heavyweights, Samsung Electronics and SK Hynix. This could expose individual investors to margin calls. With market risk highly concentrated in just two stocks, institutional investors may also withdraw capital, potentially amplifying downside pressure on share prices. Compared with other markets along the AI supply chain, the concentration level in the South Korean market is strikingly high. Currently, SK Hynix and Samsung Electronics together account for a record 60% of the Korean Kospi. In the US Nasdaq market, the two largest companies by market cap, NVIDIA Corporation (NVDA.US) and Apple Inc. (AAPL.US), together account for only about 20% of the index. Goldman Sachs analysts Timothy Moe and John Kwon noted that, under the diversification requirements stipulated by the US Investment Company Act, a further 1% hike in the combined weighting of Samsung Electronics and SK Hynix could trigger approximately USD2 billion in outflows from foreign investors in the Korean market. Goldman Sachs added that substantial inflows into leveraged exchange-traded funds (ETF), coupled with rising options trading and margin financing by retail investors, created a fragile structural environment. In such conditions, daily price swings in the equity market diverged immensely from levels justified by corporate fundamentals. ~ AASTOCKS Financial News Website: www.aastocks.com | |