Concentration in Large-Cap Stocks... Market Fatigue Makes Sustained Rally Difficult [Asset Bubble Warning]

'Daechangju' Samsung Electronics Leads the Market
Hyundai Motor and Kakao Continue Rally
Driven by Retail Investors' Stock Investment Boom
Steep Rise Raises Concerns of a Bubble

[Asia Economy Reporters Song Hwajeong and Lee Minwoo] LG Electronics is hitting the upper price limit, and Hyundai Motor is soaring over 20%. A rally of large-cap stocks continues in the stock market. However, as large-cap stocks have risen rapidly, fatigue is accumulating, leading to forecasts that the current bullish trend is unlikely to last long.

The strength of large-cap stocks has been led by Samsung Electronics, the 'leader stock' of the domestic market. According to the Korea Exchange on the 12th, Samsung Electronics closed at 91,000 KRW the previous day, marking the highest closing price since the stock split in May 2018. This represents a 9.6% increase compared to the beginning of the year. During the previous trading session, the price even rose to 96,800 KRW at one point. This is equivalent to soaring to 4.84 million KRW before the stock split. Samsung Electronics preferred shares also surpassed the '80,000 KRW' barrier, closing at 81,000 KRW the previous day, up 8.9% since the start of the year. The surge in investor sentiment is interpreted as being driven by expectations of a semiconductor industry super boom this year and strengthened shareholder return policies.

Hyundai Motor is also experiencing a steep rise. It has increased by 28.9% up to the previous day this year, an overwhelmingly higher growth rate among the top 10 KOSPI market capitalization stocks. This is more than double the KOSPI's 10.3% increase this year. Thanks to this, its market capitalization ranking rose four places from 9th on the 4th to 5th on the 11th. Hyundai Mobis also rose 22.8% this year, entering the top 10 by market capitalization (excluding preferred shares). On the 8th, news that Apple proposed cooperation to Hyundai Motor Group for the launch of the autonomous electric vehicle 'Apple Car' acted as a positive factor. Although Hyundai Motor stated that nothing has been decided as it is still in the early stages, investor sentiment continues to nurture rosy expectations.

Kakao (14.4%) also rallied, outperforming the KOSPI's growth rate. The growth in advertising and commerce revenue in Q4 last year, along with improvements in profitability in mobility, webtoons, and fintech (finance + technology) sectors, has led to expectations of significant growth this year, attracting investor interest. The anticipated IPOs of financial subsidiaries such as KakaoBank and KakaoPay continue to boost optimism. Despite the KOSPI experiencing volatility with a fluctuation of about 170 points the previous day, it managed to close up 4.38%. Additionally, the top 10 market capitalization stocks, including SK Hynix (5.56%), LG Chem (12.3%), Samsung Biologics (2.05%), Naver (5.5%), Celltrion (7.6%), and Samsung SDI (8.8%), all showed gains compared to the beginning of the year.

With the rally of large-cap stocks, the combined market capitalization of the top 10 KOSPI large-cap stocks exceeded 1,000 trillion KRW. It rose 9.65% from 986.5893 trillion KRW on the 4th to 1,081.8284 trillion KRW the previous day. Their share of the total domestic stock market capitalization also jumped from 40.8% at the start of the year to 42.25%. Samsung Electronics' market capitalization surpassed 500 trillion KRW due to the recent surge in stock price, reaching 543 trillion KRW. LG Chem's market cap increased from 62 trillion KRW at the start of the year to 70 trillion KRW.

Lee Jungbin, a researcher at IBK Investment & Securities, explained, "The returns show a regular pattern of Top 10 > Top 20 > Top 50 > Top 100 in market capitalization, and this holds true for 1-month, 3-month, 6-month, and 12-month returns as well," adding, "This means that large-cap stock plays have continued since the outbreak of COVID-19."

This strength in large-cap stocks is due to the stock investment frenzy among individual investors. Economist Lee Jongwoo said, "Individuals tend to invest in large companies they are relatively familiar with," adding, "In a liquidity-driven market, stocks that are easy to buy and sell are important, but it is difficult to buy and sell mid- and small-cap stocks at desired price levels, and analyzing companies is also challenging." In fact, looking at the top stocks by net purchases by individuals this year, Samsung Electronics was the most bought with 3.8029 trillion KRW. Other stocks in the top 10 net purchases included Samsung Electronics preferred shares (605.4 billion KRW), Hyundai Mobis (304.5 billion KRW), SK Hynix (246.2 billion KRW), Celltrion (243.5 billion KRW), Samsung SDI (221.1 billion KRW), and Hyundai Motor (170.5 billion KRW).

However, concerns about a bubble are growing as stock prices have risen rapidly based on expectations before confirming earnings improvements. Given the steep rise, it is analyzed that the large-cap stock rally will not last long. Economist Lee said, "Samsung Electronics' Q4 earnings last year fell short of expectations, which would normally cause a significant drop in stock price, but liquidity lifted it up," adding, "The price has already risen too much, so it is not easy to go further up."

This content was produced with the assistance of AI translation services.