SK Securities' Lee Jae-gyu: "In the second half's stock market, opportunities should be sought in sectors other than semiconductors"

Lee Jae-gyu, PB Deputy Head at SK Securities, emphasized that a different investment strategy is needed for the stock market in the second half compared to the first. He warned that investors who felt left out in the first half due to investing only in semiconductor stocks like Samsung Electronics and SK Hynix could be marginalized in the second half if they continue to hold only these stocks. Deputy Head Lee analyzed that to maximize profits, one must find sectors that can rise significantly, and in the second half, those targets are likely to change.

He diagnosed that while the semiconductor market remained strong throughout the first half, it was not a universal trend encompassing the entire market. He added that now is the time to meticulously analyze the fundamentals and growth potential of individual stocks for investment.

Deputy Head Lee Jae-gyu disclosed his current portfolio allocation: semiconductors 20%, bio 25%, ETF 20%, and cash 25%. He specifically mentioned that since last week, his bio allocation has exceeded semiconductors, indicating a proactive response to anticipated market changes in the second half.

Deputy Head Lee explained that this portfolio adjustment is preparation for the expected changes in the second-half market. He emphasized the importance of investing across various sectors and maintaining a cash allocation in anticipation of a different market trend compared to the semiconductor-centric market of the first half.

Deputy Head Lee Jae-gyu noted the recent sentiment of 'reducing semiconductor stocks' due to the KOSDAQ's rise, suggesting that precisely such a time could be an opportunity to target semiconductor stocks. This implies that one should seize opportunities through contrarian investing when market sentiment is heavily skewed in one direction.

He explained that when the market sentiment rapidly shifts from semiconductors to other sectors, interest in undervalued semiconductor stocks may be warranted. This is a strategy that utilizes market euphoria and oversold sentiment, and it should be approached from a long-term perspective rather than short-term trends.

Deputy Head Lee Jae-gyu suggested that holding semiconductor stocks is currently a advisable strategy. He believed that while it might have been good to reduce semiconductors and buy pharmaceutical bio or index ETFs until last week, it's now too late to sell all semiconductors and switch over, as those stocks have already risen significantly.

Instead, he explained that it is wise to hold semiconductors and use any corrections in other KOSDAQ companies, such as pharmaceutical bio, as buying opportunities. He emphasized that after a market becomes overheated or surges, a correction can always occur, and it's important to diversify one's portfolio by leveraging such times.

Deputy Head Lee Jae-gyu predicted that the KOSDAQ market would surpass 1,000 points by the end of the year. He diagnosed that the KOSDAQ has entered a consolidation phase after its initial rebound, and if it can withstand this dip for about a month, there's a high probability that the KOSDAQ's strength will continue until year-end.

He added that if the KOSDAQ doesn't significantly drop even a month from now, it could show a favorable trend until the first half of next year. This reflects the expectation that the KOSDAQ market will maintain a medium-to-long-term upward trend even after a short-term correction.

Deputy Head Lee Jae-gyu predicted that the market in the second half is likely to transition to a 'stock-specific market' where individual stock performance stands out. He explained that instead of a specific sector leading the entire market as in the first half, individual stocks based on corporate competitiveness and growth potential could achieve overwhelmingly higher returns than the market.

He forecasted that large-cap semiconductor stocks like Samsung Electronics and SK Hynix would serve to enhance portfolio stability rather than experiencing sharp surges of 100% as in the past. This means that large-cap stocks play a role in mitigating market volatility and providing stable returns.

Deputy Head Lee emphasized that investors should dedicate more time to stock research and analysis. He explained that the ability to identify a company's intrinsic value and read market trends will determine investment success in the second half.

Therefore, he advised that instead of blindly focusing on large-cap stocks, interest in small and medium-sized stocks with significant growth potential or specific theme stocks is needed.

Deputy Head Lee Jae-gyu advised investors who say, 'I'll sell when it rebounds,' that it is wise to sell about 10% now to reduce psychological burden. This is because waiting for a rebound could mean missing opportunities or incurring greater losses.

He explained that selling 10% now is a better way to reduce the overall selling volume, alleviate psychological burden, and make a clear selling decision, rather than selling 30% during a rebound. This means that when losses occur, it's important to manage risk by responding, even partially, rather than postponing decisions.

Deputy Head Lee Jae-gyu stated that if semiconductor stocks do not rise next week, he would boldly reduce his allocation. He emphasized that stock prices move based on supply and demand rather than logic, diagnosing a clear divergence from the market trend of the first half.

Citing the example of secondary battery stocks, he pointed out that many investors incurred losses by only looking for positive news. While semiconductors are different, he advised that if one only holds without any response, stock prices could decline, making it necessary to sell at least a portion. He reiterated that a semiconductor rally like the first half might be difficult in the second half.

Deputy Head Lee Jae-gyu stated that he recommends buying semiconductor stocks if a client's portfolio has none, but advises selling if the allocation is excessively high, nearing 100%. He believes that a portfolio should have about 20% in semiconductors, while emphasizing the importance of flexible management.

Specifically, if the purchase price is about 10% above the current price, he judged that maintaining a semiconductor allocation of 30-40% is appropriate. He pointed out that anything above that has low attractiveness in the current market, stressing the importance of managing risk through allocation adjustment.

Deputy Head Lee Jae-gyu argued that when news reports on economic broadcasts and newspapers frequently suggest that 'semiconductors will decline and perform poorly,' it could actually be a buying opportunity for semiconductor stocks. This is a contrarian investment strategy where extreme public pessimism can signal a low point for buying. He warned that when economic broadcasts are abuzz and the issue makes front-page news in morning papers, it could be the 'peak' of stock prices, emphasizing that this is a buying opportunity.

Deputy Head Lee Jae-gyu predicted that the Korean stock market would perform better than the U.S. market by the end of the year. He specifically foresaw continued strength in the KOSDAQ market within the Korean stock market. He analyzed that while the U.S. stock market had performed better than Korea's for over 10 years, the Korean market has shown stronger performance since last year, and this trend may not be temporary.

Deputy Head Lee explained that improved fundamentals and policy support in the Korean market could combine to make it a more attractive investment destination compared to the U.S. market. He particularly expected the growth-stock-centric KOSDAQ market to gain upward momentum with expectations of improved earnings in the second half.

Deputy Head Lee Jae-gyu mentioned that if a stock-specific market fully develops in the KOSDAQ, he would return to the broadcast to advise looking at semiconductor stocks again. This statement emphasizes the need for flexible investment strategies based on market trends.

He explained that instead of blindly investing in a specific sector, one must always seek leading stocks in response to changing market conditions. While KOSDAQ small and medium-sized stocks currently hold the lead, he suggested that interest could shift back to large-cap stocks like semiconductors once their upward trend peaks.

Deputy Head Lee Jae-gyu diagnosed that secondary battery stocks have fallen too much and are currently rebounding, and if one holds or intends to buy secondary battery stocks, buying now would be reasonable. He analyzed that a technical rebound is highly likely after an excessive decline.

This suggests that as the secondary battery sector passes through a short-term oversold period, bargain hunting may occur. However, he added that when investing, one should also consider a company's fundamentals and long-term growth potential.

Deputy Head Lee Jae-gyu pointed out that the stock prices of the three domestic cell manufacturers (LG Energy Solution, Samsung SDI, SK On) are overvalued, with price-to-earnings ratios (PER) of 30-50 times, even based on 2027 earnings. He opined that in terms of absolute valuation alone, it is difficult to consider them undervalued.

Nevertheless, Deputy Head Lee predicted that the stock prices of these companies are likely to rise further. This is interpreted as a judgment that market growth expectations, technological competitiveness, and favorable policy environments such as the U.S. Inflation Reduction Act (IRA) could collectively offset the valuation burden.

Deputy Head Lee Jae-gyu pointed out that there are not many Korean industrial sectors that can compete with Chinese companies on price competitiveness. However, he explained that some industries, such as secondary batteries, solar power, and pharmaceutical bio, are exceptions.

He particularly expected the secondary battery industry to benefit from U.S. regulations against China. He analyzed that the recent volatility in telecom equipment stocks also resulted from the U.S. regulating China, emphasizing that geopolitical factors can positively impact the growth of specific industries.

Deputy Head Lee Jae-gyu explained that he is not saying semiconductors are bad, but rather that other sectors have fallen too much beforehand, making now a worthwhile time to invest. He emphasized the need to pay attention to these undervalued companies.

He analyzed that as other sectors were relatively neglected due to the semiconductor concentration in the first half, a 'catch-up' market for these sectors could unfold in the second half. He particularly advised looking for companies with improving earnings or new growth momentum.

Deputy Head Lee added that rather than investing simply because prices have fallen significantly, one should comprehensively consider a company's fundamentals and industry outlook.

Therefore, he emphasized that investors need to broaden their interest beyond semiconductors to various sectors and make an effort to discover undervalued, sound companies.

Deputy Head Lee Jae-gyu analyzed that if robot industry valuation is somewhat reflected in Hyundai Motor, there is ample potential for additional upside. He assessed that Hyundai Motor could be a more attractive investment than market cap leaders like SK Square, Samsung Electro-Mechanics, or SK Hynix.

He specifically judged that companies like Hyundai Motor, Hanwha Aerospace, and HD Hyundai Heavy Industries have high investment appeal at their current price levels because they fell much more than other top-tier stocks in July. This means that even large, high-quality stocks that have fallen excessively have room to rebound.

Deputy Head Lee explained that the development and commercialization of robot technology could serve as Hyundai Motor's future growth engine and enhance corporate value through synergy with its existing automobile business.

Deputy Head Lee Jae-gyu emphasized that Samsung Electronics and SK Hynix are undoubtedly very good companies in the long term. Therefore, he honestly stated that it is difficult to strongly recommend reducing these stocks for other investments.

However, he suggested that if one desires better investment performance in the second half, it might be necessary to study other investment opportunities beyond the existing semiconductor-centric strategy. This indicates the importance of flexible thinking and response to market changes, rather than blind faith in specific stocks.