Mirae Asset research chief says Samsung Electronics and SK hynix’s Kospi dominance is justified by their outsized earnings contribution
The South Korean benchmark Kospi’s more-than 50 percent exposure to the country’s top two chipmakers SK hynix and Samsung Electronics is not excessive when viewed against the sector’s robust earnings outlook, according to Park Yeon-ju, head of research at Mirae Asset Securities.
“This is not a case of a fundamentally flawed market dynamic. On the contrary, earnings of the two chipmakers have improved so dramatically that valuations still do not fully capture the extent of the fundamental gains,” Park said in a recent interview with The Korea Herald.
With the AI-led chip memory boom fueling the Kospi rally, the two chip giants’ dominance on the index has intensified. Their combined weighting in the benchmark climbing from roughly 35 percent at the end of last year to 56.5 percent as of Sunday.
The concentration, however, appears less pronounced when measured against their earnings contributions.
Samsung Electronics and SK hynix accounted for 60.7 percent of the combined operating profit generated by Kospi-listed companies that filed consolidated financial statements in the first quarter, according to data from the Korea Exchange. Their combined share of net profit reached 61.9 percent.
Park said the dominance of the two chipmakers could only be considered excessive if their weighting in the market significantly exceeded their contribution to corporate earnings.
“The current concentration is far from excessive,” Park said. “If anything, valuations have yet to fully catch up with earnings growth.”
With the AI boom boosting semiconductor valuations worldwide, SK hynix and Samsung Electronics are not alone in commanding a large share of their domestic equity markets.
Based on current market capitalizations, TSMC accounts for roughly 50 percent of Taiwan’s stock market value on its own, while ASML represents about 35 percent of the Dutch market.
By comparison, the combined weighting of SK hynix and Samsung Electronics in Korea’s stock market is still relatively low.
She noted that chip stocks remained undervalued despite the recent rally. In separate reports released earlier this month, the brokerage set target prices of 550,000 won ($357) for Samsung Electronics and 3.8 million won for SK hynix.
“While memory stocks have traditionally traded at a discount due to concerns over cyclicality, the rise of AI infrastructure and the emergence of long-term supply agreements are improving visibility in earnings,” she said.
“As the market gains confidence in the sustainability of profits, we expect valuations to gradually recover.”
The local market has been experiencing heightened volatility in recent trading sessions as investors question whether the AI spending boom will translate into sustainable profits, with leveraged exchange-traded funds exacerbating market swings.
Park noted that the recent fluctuations, driven largely by short-term sentiment rather than changes in fundamentals, were likely to be temporary.
“The key question whether AI investment will remain sustainable and whether semiconductor companies can deliver the earnings the market expects,” she said.
“We believe both conditions will hold, which is why we remain constructive on the sector.”
Park was appointed head of research at Mirae Asset Securities in February. She became the firm’s youngest-ever research chief and the first woman to hold the position. Having joined the brokerage in 2005, her career spans more than 20 years.
silverstar@heraldcorp.com
