Lee Jin-woo, Research Center Director at Meritz Securities, stated on the 28th that the KOSPI index decline threatening the 6,000 level already reflects a worst-case scenario despite overlapping concerns about AI investment sustainability and China's technology catch-up. Lee attributed the market downturn to dual pressures: initial worries about whether US big tech companies would continue AI investments to sustain semiconductor demand, now compounded by fears of narrowing technology gaps from China. The market previously perceived the semiconductor sector as effectively monopolized by Samsung Electronics and SK Hynix, but growing concerns about intensifying supply competition have further weakened investor sentiment.
Lee noted that determining structural change remains premature, pointing to synchronized declines in Chinese semiconductor equipment companies on the same day. "Looking at just today, Chinese semiconductor equipment companies are also falling, making it difficult to distinguish who benefits and who suffers," Lee said. "Overall, this reflects a weakening semiconductor sentiment and efforts to reduce related exposure."
Samsung Electronics and SK Hynix Valuation Reaches 3x PER
Lee assessed current valuations as reflecting excessive fear. "Current stock prices reflect not just a cycle slowdown but a level that denies the cycle itself," Lee stated. "The price-to-earnings ratios (PER) of Samsung Electronics and SK Hynix are only around 3x, even when pulling forward future earnings."
Lee compared current levels to historical semiconductor market bottoms: "Even when semiconductors were evaluated as a cyclical sector in the past, stock price bottoms formed at PER levels of 4-6x. Since we've now fallen below that range, the market's fear is reflected at an extreme level."
While acknowledging potential short-term volatility due to weak supply-demand dynamics, Lee stated: "Current stock price levels already assume the worst-case scenario. I don't see further level-down from here."
AI Demand Proof Required for Market Confidence Recovery
Lee emphasized that restoring market confidence requires demonstrating strong AI demand. "The market already knows that companies plan to continue investing," Lee said. "What's important is confirming that AI demand is actually strong enough to make investment sustainable."
Lee characterized the current market as skeptical: "The market currently won't easily believe any earnings results. Investment sentiment will recover only when big tech investment guidance and AI-related demand are confirmed with numbers."
Year-End KOSPI Target Maintained Pending Earnings Revisions
Lee stated no intention to adjust the year-end KOSPI target if existing earnings forecasts hold. "If companies' earnings estimates are substantially revised downward, we would need to adjust our existing outlook, but so far there's no evidence that the earnings cycle has turned," Lee said. "If existing earnings forecasts are maintained, a trend-based rebound will be possible after this adjustment."
FAQ
What caused the KOSPI decline to the 6,000 level on the 28th?
Lee Jin-woo attributed the decline to combined concerns about AI investment sustainability by US big tech companies and China's technology catch-up in semiconductors, which weakened investor sentiment beyond initial demand worries.
What PER level do Samsung Electronics and SK Hynix currently trade at?
Lee stated that Samsung Electronics and SK Hynix trade at approximately 3x price-to-earnings ratio, below the historical semiconductor sector bottom range of 4-6x PER during past cyclical downturns.
What does Lee Jin-woo require for market confidence recovery?
Lee emphasized that market confidence requires numerical confirmation of strong AI demand through big tech investment guidance and AI-related demand data, as the market currently remains skeptical of any earnings results.
