[Noon Salon] Hana Securities Research Fellow Lee Kyung-soo: "Just a Mix of Supply-Demand Tangles and Seasonality, Not a Sign Semiconductor Fundamentals Are Broken"
Hana Securities Research Center Chief Research Fellow Lee Kyung-soo appeared on today's Noon Salon segment. He cited three causes for today's sell-off. First, supply-demand flows: retail investors who piled in near the highs are now facing losses and continuing to sell in a panic aftershock, while foreign investors — who typically follow a mean-reversion pattern of selling on rallies and buying on dips — have recently been selling index ETFs while buying only individual leveraged ETFs, an unusual pattern that is amplifying intraday volatility.
Second, fundamentals: he explained that KOSPI and semiconductor stock prices react not to the absolute level of earnings but to the acceleration of year-over-year (YoY) growth rates, and that semiconductor earnings YoY growth is expected to decelerate from around 230% in Q2 to 180-190% in Q3, reflecting 'earnings peak-out' concerns. Third, seasonality: he noted that July is typically the month with the widest gap between earnings and stock prices, as institutions that have locked in first-half fund performance tend to sell off names they bought through June.
On identifying a market bottom, he said that analysis of past cases where KOSPI fell 25-30% from its peak — the 2002 IT bubble, the 2004 China shock, the 2008 global financial crisis, and the 2009 Dubai World default — showed that a genuine bottom formed roughly four months later on average. However, he added that since the current situation is not a systemic crisis like those past episodes, the path to a bottom could be shorter. He noted that a common signal at true bottoms was foreigners steadily absorbing retail selling, and that the recent shift to foreign net buying resembles this pattern.
On volatility driven by leveraged ETFs and derivatives such as options, he interpreted such derivative-driven distortions as potentially creating buy-the-dip opportunities to lower average cost basis, independent of actual earnings. Strategically, he proposed a seasonality-based, rules-driven approach, noting that July's earnings-factor weakness tends to be made up for between August and October — making it valid to buy earnings-strong semiconductor names such as Samsung Electronics, SK Hynix, Micron, Western Digital, AMD, and Nvidia at July lows and trade them through the second half.