Even though the KOSPI on the 22nd closed at 9,114.55, setting a new all-time high, the index excluding Samsung Electronics and SK hynix has actually fallen so far in June.
The domestic stock market has crossed the 9,000 mark for the first time ever, but the gains are concentrated in just two stocks.
On the 22nd, the KOSPI closed at 9,114.55, breaking its previous record. It reached 9,000 for the first time on the 18th, and four days later set a new high. Since the beginning of this year, it has risen 116.28%. From 4,214.17 to 9,114.55, it has more than doubled in less than half a year. That pace of increase is the highest among the G20 countries.
The real problem lies elsewhere. The mega-cap exclusion index, which is calculated by excluding Samsung Electronics and SK hynix from the KOSPI 200, fell 2.48% in June. Over the same period, the KOSPI rose 7.53% and the KOSPI 200 gained 10.01%. In other words, if the two stocks that supported the index are removed, the rest of the market had already been moving backward.
The weight of the two stocks is growing larger by the day. The combined market capitalization share of Samsung Electronics and SK hynix has reached 54.6% of the entire KOSPI. On the 22nd, SK hynix overtook Samsung Electronics intraday to become the No. 1 stock by market cap. Samsung Electronics’ throne, maintained for 26 years since 2000, was shaken.
The answer is already embedded in the data. The market excluding those two stocks was not in an uptrend but a downtrend. The 9,000 level is less a reflection of the market’s overall strength than of a near-direct transcription of the share prices of those two companies.
Concentration feeds on itself. Passive funds and pension funds that track the index automatically buy more of the biggest stocks. As large-cap stocks rise, their weight increases; as their weight increases, more money follows. In an uptrend, this is a powerful engine, but when the direction changes, the same force works in reverse.
An amplifier has also been built in. A single-stock leveraged ETF launched on the 27th of last month saw returns surge to around 50% in just one month. It is a product that responds twice as strongly to movements in the underlying asset. It grows quickly when prices rise, but collapses twice as fast when they fall. The margin loan balance, which reflects stock purchases made with borrowed money, hit an all-time high of 38.4786 trillion won on the 19th.
When the two stocks wobble, the index falls; when the index falls, leveraged positions and margin trades are liquidated in a chain reaction. Losses are concentrated among individual investors, who account for 92% of trading in such products. The question of whether it is dangerous if it falls has already shifted to how far that danger can spread.
There are warnings against excessive concentration. Han Ji-young of Kiwoom Securities said capital has been moving even within the group of leading stocks, intensifying extreme concentration. Lee Kyung-min of Daishin Securities pointed out that the advance-decline ratio, which measures the proportion of rising stocks, has fallen into the 40% range. That is the lowest level since the period when the index was giving up the 1,500 line during the COVID-19 crisis. It may be evidence of a solid market leader, but it also means the possibility of a backlash has grown just as large.
The cautious view leads to restraint in chasing the rally. The advice being offered is to pick companies whose earnings estimates are rising or whose strong earnings growth is likely to continue.
There is also no shortage of counterarguments. Some say the trend is firm because there are clear leading stocks. Since the gains in the two companies are based on the foundation of AI memory earnings, the argument goes, this is not the same as an unfounded bubble. Securities firms’ KOSPI target is 11,500, while some foreign institutions have raised it to 12,000. That is why expectations for a 10,000-point KOSPI have not cooled.
Investor trust in the index is shaking. The 9,000 level is closer to a report card for the two stocks than to a measure of the market’s overall strength. As more time passes with many stocks left behind, the gap between the gains held by individuals and the index itself will widen.
The risk lies in volatility, because capital and debt are concentrated in a small number of stocks. Even a minor correction can send the market reeling. If the two stocks begin to take profits, the index could plunge and margin calls would follow. The shock would spill beyond the market. Polarization in asset markets has already become a social issue.
The warning signs are accumulating. Trading volume has declined, but the share of the two stocks has increased. New highs and new lows are appearing at the same time. This is a textbook case of a market that has become lopsided.
Concentration itself cannot simply be eliminated. The earnings of the two companies are in fact growing. Money flowing into them is also a sign that the market is functioning properly. Forcing capital to spread out would amount to fighting fundamentals. The goal should not be to erase concentration, but to prevent it from turning into a crash.
At present, the KOSPI is on a one-way road driven by semiconductors. Excluding the two stocks, the June market was already in decline. Biotech, secondary batteries, and domestic demand stocks have all been pushed aside by capital flows. A market without support will wobble at even a small shock. The priority is to cultivate other sectors that can provide support.
The key lies with listed companies. Many firms outside semiconductors still lack earnings and shareholder returns. With no reason to buy them, capital flows only into the two winners. Companies must improve capital efficiency and return profits to shareholders. The more investable stocks there are, the less concentrated the market will be. If value-up remains only a slogan, dependence on semiconductors will deepen further.
The responsibility of pension funds and institutions is also heavy. When large pools of capital simply follow the index, big stocks become even bigger. That only pours more fuel on concentration. Allocation must be broadened to include mid- and small-cap stocks as well as neglected sectors if the market is to regain breadth.
The index structure also needs to be revised. A market-capitalization weighting system automatically makes large stocks bigger still. Placing a cap on the weight of a single stock would loosen this loop. But that would not eliminate concentration; it would only reduce the degree to which the index is swayed by the two stocks.
The key issue is not the share prices of the two companies, but market balance. If the 10,000-point KOSPI arrives resting on only two shoulders, that number would mark not a triumph of capital markets, but a concentration of risk.