Korea's stock market uptrend is unlikely to falter despite the heavy concentration of capital flowing into the semiconductor and artificial intelligence sectors, according to a new report. Concentration in a few leading sectors alone is not enough to trigger an index correction, the report argued.
Earnings Over Concentration: Market Uptrend to Continue
In a report released Tuesday, Shinyoung Securities analyst Lee Sang-yeon said, "Despite the concentration of capital into a few sectors, factors that could undermine the upward trend of the domestic stock market in the short term will be limited."
As the KOSPI has continued to push to new highs, concerns have mounted that the concentration in AI-related sectors has become excessive. In May alone, the IT hardware sector surged 76.1% and the semiconductor sector rose 55.7%, far outpacing the KOSPI's overall gain of 28.4%.
"I do not think the strength of the domestic stock market should be regarded simply as a result of concentration in a few sectors," Lee said.
"While it is true that large semiconductor companies are leading the upward revisions in earnings, from the perspective of gauging a bubble peak, it is positive that earnings estimates are also being raised at companies outside this group," he added.
Indeed, over the past month, KOSPI operating profit estimates for 2026 and 2027 have been raised by 10.3% and 11.6%, respectively. Earnings estimates for companies excluding Samsung Electronics and SK hynix were also revised upward by 10.5% and 10.6% over the same period.
No Correction Without External Shock; Export Base Broadens
The report directly rebutted concerns that concentration would inevitably lead to an index correction.
"Above all, an index correction does not occur simply because capital is concentrated in a few leading sectors," Lee stressed. "Looking at past cases, periods when leader-driven upward trends were undermined were accompanied by external shocks such as the materialization of U.S. tightening concerns, the expansion of recession risks, and the contraction of global liquidity."
"Considering the current global liquidity environment and corporate earnings outlook, the possibility of such shocks materializing in the short term is still limited," he said. "At this point, the key variable determining the medium- to long-term direction of the domestic stock market is not sector concentration itself, but whether the AI investment cycle and the trend of improving corporate profits will continue."
He added that as the second-quarter earnings season approaches, market attention is likely to shift from expectations to actual performance. "As the second-quarter earnings season nears, the market's focus is likely to move from mere expectations to whether actual earnings improvements materialize," he said. "While dependence on semiconductors is high, upward revisions in earnings estimates are also continuing in other sectors, and the export recovery is not limited to certain items but is gradually spreading."
Export indicators also show signs of recovery in sectors beyond semiconductors. Petrochemicals and petroleum products saw their export growth rates climb again on the back of higher oil prices, while cosmetics maintained a stable trend thanks to peak-season effects. Secondary batteries showed signs of export improvement on the back of expanding demand for energy storage systems (ESS).
