[Edaily Reporter Park Sun-Yeop ] Although the domestic stock market is showing a rebound centered on neglected stocks following a sharp decline, analysts suggest that this broad-based rally is unlikely to last long. Given that earnings forecasts are being revised upward primarily in the semiconductor sector, the market’s focus is likely to shift back to existing leading stocks such as SamsungElectronics(005930)and SK hynix(000660). However, with liquidity conditions remaining tight and the added influence of leveraged products, the rally in leading stocks is also expected to be accompanied by high volatility.
Kim Jun-young, an analyst at iM Securities, stated in a report on the 6th, “The spread to neglected stocks is likely to be temporary,” adding, “The upward revision of earnings, centered on semiconductors, suggests a shift back toward leading stocks.” Recently, the domestic stock market has seen a rebound in sectors that had been neglected—such as banking, transportation, securities, and cosmetics and apparel—while large-cap semiconductor stocks have been taking a breather since late June.

However, Analyst Kim assessed that it is difficult to view this as a full-fledged rotation. This is because, while top-market-cap stocks such as SamsungElectronics and SK hynix declined, the combined market capitalization of other KOSPI-listed companies—excluding these two—did not increase significantly. He explained, “On the surface, it appears to be a broad-based rally, but it is difficult to view this as the result of funds shifting from top-market-cap stocks to other stocks,” adding, “It is closer to an optical illusion caused by the particularly sharp declines in SamsungElectronics and SK hynix due to the expansion of leveraged products.”
Ultimately, the assessment is that the driving force behind the market will return to earnings momentum. According to iM Securities, the one-month upward revision rate for 12-month forward operating profit forecasts was highest for the semiconductor sector at 25.4%. Even over the past three months, semiconductor profit momentum reached 114.3%, significantly outpacing the KOSPI as a whole. Analyst Kim said, “The more factors that shake the stock market, the more we should rely on leading stocks,” adding, “A rally centered on leading stocks is expected following the broad-based rally.”
However, he noted that the return of leading stocks does not necessarily mean a stable bull market, as the liquidity environment in the domestic stock market has become more fragile than before. While customer deposits and margin loan balances have increased in absolute terms, they have not kept pace with the rapid growth in market capitalization. Analyst Kim pointed out, “Margin loan balances and customer deposits relative to market capitalization have fallen significantly below pre-COVID levels,” noting, “With the stock market surging sharply over a short period, liquidity in the real economy is struggling to support this rally.”
The report interpreted the current domestic stock market as “a structure where dreams have grown larger, but short-term liquidity to support them is lacking.” It explained that while the stock market has expanded roughly threefold over the past year as expectations for growth in the artificial intelligence (AI) industry were rapidly reflected in stock prices, it will take time for cash flows—such as actual profits and dividends—to catch up. Citing the dot-com rally of 2000 as an example, Researcher Kim pointed out, “While the direction of technology was correct, the market priced in 10 years’ worth of growth in just two years, and liquidity could not hold up while the real economy caught up.”
Single-stock leveraged ETFs were cited as another factor driving volatility. According to iM Securities, the total assets of the SK hynix single-stock leveraged ETF stand at $19.4 billion, which is 4.26 times SK hynix’s average daily trading volume of $4.5 billion. SamsungElectronics’ leveraged ETF also has assets of $12.4 billion, equivalent to 2.77 times its average daily trading volume. In contrast, the total assets of single-stock leveraged ETFs for U.S.-based NVIDIA amount to only 0.19 times its daily trading volume.
Researcher Kim analyzed, “This structure, where derivatives overwhelmingly outpace the underlying assets, is unique to large-cap Korean stocks,” adding, “Given that high volatility and large-scale leveraged products are layered on top of thin liquidity, the market is inevitably vulnerable to volatility shocks.” He explained that leveraged ETFs repeatedly rebalance their portfolios—buying when stock prices rise and selling when they fall—to maintain their target multiplier daily; this trading volume, concentrated around the closing price, amplifies market volatility.
Consequently, even if the domestic stock market resumes a rally led by semiconductor stocks for the time being, it is highly likely to experience sharp fluctuations rather than a smooth upward trend. Analyst Kim emphasized, “While the market will return to being led by these stocks, the path will be bumpy,” adding, “The more challenging the market becomes, the more important it is to maintain a clear view of the big picture.”