Why We're Not Chasing Today's Chip-Equipment Surge

Today's Mood

KOSPI rose 1.65% to close at 7,007.72, reclaiming the 7,000 level after seven sessions below it. KOSDAQ gained 1.11% to 836.27, and the won strengthened 0.73% to 1,377.80 per dollar.

The index was strong from the open. Large-cap chipmakers led first, with equipment and back-end packaging names following — the day’s color was clear from the start.

Checking Yesterday's Call

Last session (Sep 18) we said we’d watch two things: whether foreign net buying continued, and whether cable and optics names like Gaon Cable and Sungho Electronics held their trading value and gains.

Neither held. Foreigners net-sold 160.3 billion won of KOSPI cash shares today, ending what was a one-day buying streak (Financial News, Ajunews). Gaon Cable fell 3.21%, and Sungho Electronics rose just 0.75%, nowhere near last week’s single-day gain of more than 19% (AlphaSquare).

Instead, institutions and large-cap chipmakers drove today’s gain — both the buyer and the leading stock changed from the prior session.

Chip Exports Just Hit a Record

Korea’s exports for Sep 1-20 totaled $71.4 billion, up 78.3% from a year earlier. Semiconductor exports within that reached $34.1 billion, up 259.4% — a new record, and nearly half of total exports (Hankyung, Ajunews, Newspim).

The figure is a preliminary customs tally covering only the first 20 days of the month. Even so, the size of the jump was enough for the market to point to it as today’s driver.

Samsung Electronics Led the Index

Samsung Electronics rose 4.62% to close at 272,000 won, accounting for the largest single share of today’s index gain. Its trading value topped 5 trillion won (News1), the largest on the main board.

Valuation still leaves room. Samsung trades at 3.9x forward earnings, 73.7% below the average target price from 36 analysts. Against its 52-week high, it’s still down 26.8%.

For readers newer to this: forward P/E measures today’s share price against earnings expected over the next year. Analyst target prices are estimates built on those same earnings forecasts, so a share price far below target means the market hasn’t fully bought into that forecast yet.

SK Hynix rose a smaller 0.97% to 1,867,000 won. It also trades cheap on this measure — 4.0x forward earnings, 70.5% below the average target from 37 analysts.

Photo: naotakem / Flickr (BY 2.0)

Chip Equipment Stocks Outran the Big Names

Today’s biggest movers weren’t the large caps — they were chip equipment and back-end packaging names. Among stocks we follow, SFA Semicon rose 16.57%, Hana Micron 16.34%, Samhyun 9.22%, and Wonik IPS 6.09%.

Two things sit behind that. The Philadelphia Semiconductor Index rallied on Wall Street on Sep 18, lifting sentiment (Seoul Economic Daily), and Korea Eximbank’s overseas research institute just raised its forecast for this year’s global chip market to $1.6 trillion, double last year’s size (Financial News). When large chipmakers raise capex, that spending flows to equipment and back-end suppliers (Gukje News).

Hana Securities analyst Kim Rok-ho said “both front-end and back-end suppliers remain in a valid investment window” (Seoul Economic Daily).

Within the same theme, direction split. Daehan Fiber Optics, which had rallied earlier in the week, fell 3.15% today as it took a breather.

Institutions Bought, Retail Sold

Today’s flow story wasn’t foreign investors — it was institutions. Institutions net-bought 1.4924 trillion won of KOSPI cash shares, while retail net-sold 2.979 trillion won (Financial News, Ajunews). Foreigners net-sold 160.3 billion won in cash but bought heavily in futures (Hankyung), so they weren’t betting against the index direction itself.

Most of the institutional buying concentrated in large-cap chip names, which also means the spread between individual stock returns was wide relative to the index’s overall gain.

SK Square Rode Its Subsidiary's Strength

SK Square’s 4.66% gain is tied to the same story. More than 95% of the holding company’s net asset value comes from its stake in SK Hynix (Invest Chosun) — when SK Hynix rises, SK Square tends to rise by at least as much, sometimes more.

SK Hynix itself gained only 0.97% today, but SK Square rose 4.66%, a bigger reaction. The market read that gap as also reflecting hopes for expanded shareholder returns.

Most Names Outside Chips Sat Still

Stocks outside the chip theme were mostly quiet. Bank shares Shinhan Financial (+1.62%) and KB Financial (+1.14%) rose modestly, while battery, shipbuilding and defense names fell — LG Energy Solution dropped 2.75%, HD Hyundai Heavy Industries 2.38%, Hanwha Aerospace 1.83%, and Hyundai Motor 1.77%.

The gap between sectors was wide relative to the index’s overall gain.

Rates Held, Chips Rose Anyway

The U.S. 10-year Treasury yield sits at 4.94%, close to its 90-day high of 5.01%. Rates didn’t come down, yet chip stocks rose anyway — a sign today’s move came from the chip cycle itself, not from rate expectations.

One outlet summed up the session as “rates rise, but chips still sell” (Financial News). Daishin Securities also read the U.S. policy backdrop as more supportive than burdensome today (Newspim).

KOSDAQ and the Won

KOSDAQ rose 1.11% to close at 836.27. With a large share of chip equipment names listed there, its recent uptrend has actually been steadier than KOSPI’s.

The won strengthened 0.73% to 1,377.80 per dollar. A stronger won on a day risk appetite improved is the expected pairing.

What We're Watching Next Session

First, whether institutional net buying continues next session. Days when retail sells this heavily sometimes end up being one-day bounces.

Second, whether chip-equipment names that jumped more than 16% today, like SFA Semicon and Hana Micron, hold their trading value next session. Daehan Fiber Optics, which rallied earlier, showed a rally-then-rest pattern this week.

Third, whether U.S. chip stocks extend this move. If the Philadelphia Semiconductor Index wobbles again, today’s equipment-stock gains would be first to give back.

Fourth, whether foreign investors return to KOSPI cash shares before Sep 23, the last trading day before the Chuseok holiday (Sep 24-26).

Worth a Closer Look

Korea Eximbank’s overseas research institute just raised its forecast for this year’s global chip market to $1.6 trillion — double last year’s size, and 60% above the forecast the same institute gave in the second quarter (Financial News).

Memory is driving the growth. This year’s memory chip market is expected to reach about $886.5 billion, four times last year’s size, with memory’s share of the total chip market rising from 30% last year to 55% this year. DRAM is expected to grow 3.4x to $519.0 billion, and NAND 4.9x to $360.0 billion.

That forecast sits behind why equipment and back-end names like SFA Semicon and Hana Micron outran the large caps today. If the market grows this much, that volume eventually flows through as orders to equipment, materials and back-end suppliers.

SK Square doesn’t make chips itself, yet it rose 4.66% today — more than SK Hynix’s 0.97%. The reason is in what the holding company actually owns.

More than 95% of SK Square’s net asset value comes from its SK Hynix stake (Invest Chosun). When that stake’s value rises, SK Square’s own valuation tends to move the same way, and on days the market prices that stake more generously, SK Square can move even more than SK Hynix itself.

The market layered expectations for expanded shareholder returns on top of that today — a reminder of how one large chipmaker’s share price can pull another company’s stock along with it.