Semiconductors deserted by retail investors, a chance for a year-end rally

Lee Jae-gyu, PB Manager at SK Securities, stated that he changed his portfolio composition between last Monday and today. As of August 31, the portfolio consisted of semiconductors (20%), power equipment (10%), pharmaceuticals/bio (25%), secondary batteries (10%), and neglected sectors (15%). However, he emphasized that he has now increased the weight of the energy sector, particularly wind and nuclear power (Doosan Enerbility), noting the inflow of funds into these areas. He added that his personal interest in wind power is growing.

Manager Lee Jae-gyu explained that individual investors recently net-sold approximately 8.4 trillion won on the KOSPI, with a significant portion of this occurring in the semiconductor sector. He advised that if any viewers watching today's broadcast have completely sold off their semiconductor holdings, they should consider buying some back even now. He emphasized that despite the selling pressure from individual investors, the market trend is turning positive, highlighting the importance of seizing opportunities through re-entry.

Micron's stock turning positive last Friday is interpreted as a positive signal for the domestic market. Manager Lee Jae-gyu viewed this not as an isolated issue for Samsung Electronics and SK Hynix, but rather as a potential change in the overall supply and demand position of foreign investors in emerging markets and the South Korean stock market. He analyzed that Micron's rebound could be the start of an influx of foreign capital.

This supply shortage is expected to have a positive impact on the improvement of the semiconductor industry.

Manager Lee Jae-gyu explained the current market situation by comparing stock investing to driving. He stated that just as one drives slowly on winding alleyways, a cautious approach is needed when the market is uncertain. However, when entering a highway, one speeds up, meaning aggressive investment is necessary when the market is in a clear upward trend. He diagnosed that Samsung Electronics and SK Hynix are currently showing positive trends, as if they have entered a 'highway section'.

Individual investors sold approximately 8 trillion won worth of stocks, but an equivalent amount was bought by institutions and foreigners. Manager Lee Jae-gyu described this as 'quality supply and demand,' explaining that a trend where individuals sell and stock prices rise is statistically a desirable phenomenon for the market. He analyzed that this supply and demand structure could form the basis for further gains, along with qualitative improvements in the market.

However, Manager Lee Jae-gyu believes that repeatedly testing this resistance level ultimately increases the possibility of a breakthrough. He noted that unlike past attempts, there is now strong foreign investor buying, raising expectations that a breakthrough of the resistance level could become a reality this time. He analyzed that foreign buying will be the key driver for breaking through the resistance.

Manager Lee Jae-gyu assessed the current market's supply and demand situation as very positive. He stated that while macro indicators affecting supply and demand should be monitored, the domestic market had already fallen excessively, so even if macro conditions deteriorate to a certain extent, it is likely already reflected in the market. Therefore, he emphasized that now is the time to focus on the influx of funds into the market and expectations, rather than excessive macro concerns.

In the stock market, when it rises, only a few leading sectors go up, and when it falls, most sectors decline together. Manager Lee Jae-gyu pointed out that due to this characteristic, when stock prices rebound after a significant decline, it is difficult for most investors' accounts to recover. Especially if stock holdings were reduced at the bottom of a bear market, account recovery can be even harder if one is excluded from the leading sectors during the recovery period. He added a paradoxical piece of advice: sometimes, holding onto stocks without being swayed by market trends can be advantageous.

Manager Lee Jae-gyu cited Kenneth Fisher's adage that skeptical investors are the last to seize opportunities when the market recovers, and advised that if one's cash ratio is excessively high, they should actively consider increasing their stock exposure. For example, he emphasized that an investor with a 70% cash ratio should aim to fill at least 50% with stocks. He recommended adjusting portfolios using existing cash rather than relying on credit or margin trading.

Until around August 20, the KOSDAQ recorded the highest increase among major global indices. Manager Lee Jae-gyu mentioned that the strong trend of the KOSDAQ should be watched for its potential to continue until the first quarter of next year. However, he analyzed that with the KOSPI strongly rising since last week, the increase rates of both the KOSPI and KOSDAQ are now almost similar based on closing prices. This is interpreted as indicating a balanced recovery across the entire market.

This indicates that the market is gradually recovering to a normal, balanced state.

Last Friday, the US announced a jobs surprise. Generally, strong employment can increase the likelihood of interest rate hikes, negatively affecting the stock market. Indeed, US stocks fell, but memory semiconductor-related stocks rose sharply. Manager Lee Jae-gyu used the phrase "supply and demand is king" to describe this phenomenon, emphasizing that if capital inflow is strong, stock prices can rise despite concerns about macro economic indicators. He analyzed that foreign buying is acting as a major driving force for stock market gains.

Manager Lee Jae-gyu explained that the presence or absence of foreign buying is a more important criterion for stock judgment than new news or themes. He stated that if there had been no foreign buying, he would have evaluated robot stocks negatively, but now that positive buying is flowing in, the market sentiment has changed.

Manager Lee Jae-gyu argued that the semiconductor materials, parts, and equipment (Sohanj) sector should shift from a conservative stance to a virtuous cycle perspective. As a basis, he cited forecasts that Samsung Electronics and SK Hynix's inventories would fall to less than 10 days. According to a Shinhan Investment Corp. report, 56% of Sohanj companies recorded earning surprises in the first half of this year, and increased sales due to CAPEX investments in 2027 are also expected.

Manager Lee Jae-gyu diagnosed that the Price-to-Earnings Ratio (PER) of front-end and back-end semiconductor companies is significantly lower than their historical averages. Samsung Electronics' PER is around 4x, Micron's is 7x, and CXMT's is 20x. He explained that these low PERs indicate sufficient upside potential for these companies. He believes that the current valuation has entered an attractive range, presenting an investment opportunity.

He advised investors to establish their own clear technical trading principles, stating that such criteria help in maintaining unwavering investments.

Manager Lee Jae-gyu stated that he is currently maintaining a portfolio allocation of 20% in semiconductors and 10% in power equipment. He added that if the pharmaceutical/bio sector does not show a strong rebound this week, he plans to reduce its weight. He also noted the interconnectedness with the secondary battery and renewable energy sectors, forecasting that if the KOSPI maintains support above 2,700 points for about two more weeks, the market will show a positive trend until the end of the year.