[Choice Times=Jin-An Kim, Former Executive Director, Samsung Electronics Middle East]

On the 16th, the KOSPI index closed at 4,840, giving the impression that it could soon break through the 5,000 mark. I am not currently investing in equities, which allows me to look at the stock market more objectively.

From my past experience, whenever the atmosphere becomes one in which everyone seems about to make a fortune, it is invariably a sign that a crash is just around the corner. There is a saying in the stock market—almost a rule of thumb—that “the higher the peak, the deeper the valley.”

Riding the AI boom, semiconductors have served as the locomotive driving the stock market’s runaway surge. But when Korea’s economic fundamentals, domestic inflation, and the plunge of the won are taken into account, the future does not look particularly bright. Seen in that light, the explosive rise of the Korean stock market appears abnormal.

The total market capitalization of the KOSPI stands at around 4,000 trillion won, of which the semiconductor sector accounts for roughly 38 percent (about 1,400 trillion won). Samsung Electronics and SK hynix alone make up nearly 40 percent of that share.

It is fair to say that the Korean stock market is driven by the semiconductor sector—and by Samsung Electronics and SK hynix in particular. The concentration in semiconductors is excessive. If the semiconductor industry is hit, the Korean stock market could immediately slide into a crash.

The current rally is a surge created by semiconductors, Samsung Electronics, and SK hynix. Samsung Electronics’ share price hovered in the 50,000-won range early last year, but closed today at nearly 150,000 won—almost tripling in just one year. SK hynix shares were in the low 170,000-won range early last year, but today closed at 756,000 won, a rise of about 4.5 times.

No matter how strong the earnings outlook for the two companies may be, prices have risen nonstop over the past year. They have risen as much as they can. The time has come for investors to take profits. Further gains will require a new momentum. Otherwise, the market will move sideways in a crab-like correction, or, if negative news hits the semiconductor sector, it could plunge into a crash.

In fact, trading volume for the two companies has dropped sharply—from about 40 percent at the end of last year to around 23 percent now. When trading volume declines, it is a sign that a period of correction has arrived.

Strangely, during stock market booms, most investors—especially retail investors—seem hypnotized, believing that the rally will last forever. The environment is filled with good news, and so-called market experts constantly urge people to keep investing.

But small negative factors begin to accumulate quietly, without our noticing. At some point, they suddenly surface all at once, and the risks that had been hidden pour out in a single moment. That is when the market crash begins. Sidecar mechanisms are triggered several times a day as prices tumble, and retail investors, stunned, miss their chance to cut losses.

A risk signal is now emerging in semiconductors. President Trump has allowed the export of AI semiconductors such as Nvidia’s H200 and AMD’s MI325X to China, while imposing a kind of 25 percent export tariff.

In response, the Chinese government announced that it would restrict imports of semiconductors like the H200 in order to promote technological self-reliance and protect its domestic industries. A new round of tariff disputes between the United States and China over semiconductors could erupt. As is well known, Nvidia’s and AMD’s AI semiconductors use HBM supplied by Samsung Electronics and SK hynix. Korea could become a direct victim.

Negotiations with the United States over semiconductor tariffs are also still unresolved. Judging from the current atmosphere, President Trump is approaching semiconductors from a national security perspective, and it remains undecided whether a 15 percent or 25 percent tariff will be imposed on imported chips. If protective tariffs are levied under the pretext of safeguarding semiconductors produced in the United States, the rate could be even higher. If government officials are naively believing that the United States will grant Korea most-favored-nation treatment, they need to rethink immediately.

The situation has changed drastically. When tariff negotiations began, the won was trading in the 1,330–1,340 range. Now it has surpassed 1,470 and may even exceed 1,500. A move from 1,330 to 1,500 represents a depreciation of roughly 13 percent.

The effect of a 15 percent tariff imposed by the United States on Korean products has almost disappeared. Korean exports have gained price competitiveness, which could prompt the United States to impose tariffs on semiconductors far higher than 15 percent. Government officials must always prepare negotiations with the worst-case scenario in mind.

Bad news comes all at once. I am not a stock market expert, but based on past experience alone, the Korean stock market now looks precarious. Stock investing is a matter of individual judgment, and no one can offer definitive advice. I will simply say this: the signs for semiconductors do not look good.

#KOSPI #SemiconductorRisk #MarketCorrection