Employees look at computers, as monitors on the wall show the KOSPI index started Thursday's trading at 2,338.14 points, in a dealing room at Hana Bank's headquarters in central Seoul, Thursday. Yonhap

Global semiconductor sector downcycle attributed to KOSPI's drop

By Anna J. Park

Korea's benchmark KOSPI displayed the lowest rate of return this year out of G-20 countries' benchmark indexes, except for only Russia.

According to data from the Korea Exchange (KRX), the KOSPI's annual rate of return this year ― a comparison between the closing price of the first trading day in January and the closing price of Dec. 20 ― stood at minus 21.93 percent. The figure is the lowest among G-20 peers, except Russia that's been at war with Ukraine since early this year. The Russian Trading System (RTS) index posted an annual return of minus 40.4 percent.


Most G-20 countries' main benchmark indexes performed better than Korea and Russia's. Actually, the main benchmark indexes of six countries ― Turkey, Argentina, India, Brazil, Indonesia and South Africa ― logged positive returns this year, with Turkey topping the chart with 181.26 percent and Argentina following with 101.38 percent. India, Brazil, Indonesia and South Africa followed the list with 4.26 percent, 2.83 percent, 1.55 percent and 0.35 percent, respectively.

Even with other G-20 countries that saw their stock market indexes fall, their drop rates did not exceed a range of minus 20 percent. Japan's Nikkei 225 posted a minus return of 9.33 percent, and the U.S.' Dow Jones Industrial Average (DJIA) logged minus 10.21 percent.

China's SSE Composite Index also performed better than the KOSPI, as it fell by 19.25 percent this year, with the country's zero-COVID policy that entailed heavy lockdowns burdening the economy.

Market watchers attributed the KOSPI's poor performance to weakened semiconductor business for this year. Korea's two representative semiconductor companies, Samsung Electronics and SK hynix, take up more than 20 percent of the KOSPI's entire market cap. This means semiconductor sectors' global business cycles could wield a huge influence on the KOSPI's movements.

Specifically, global memory chip markets ― Korea's main export area ― witnessed a plunge in demand since the second quarter of this year, with slashed global demand for smartphones and personal computers amid economic slowdowns. In addition, the global server industry has also slowed acquisition of memory chips, sending blows to the chip prices during the third and fourth quarters.

"As the semiconductor industry has a heavy weight among corporations in Korea, it affected Korean companies' overall earnings decrease, which is steeper than other major countries," said Jo Jae-un, a quantitative strategist at Daishin Securities. "In particular, Korean IT companies' earnings per share (EPS) fell by 50.6 percent, leading the KOSPI's lowered earnings forecasts."

Other unfavorable external factors, such as China's lockdown policies, the weakened Korean won and internal factors like real estate-related risks, have also been cited as factors behind the KOSPI's poor performance.