Chip Suppliers Jump as Investors Await Samsung, SK Hynix Breakout; One Stock Surges 40%

Kospi Starts October Strong on Micron Earnings

Rebound Builds as Rate, Oil Pressures Ease

Micron Posts Record Quarterly Results

Boost From Softer-Than-Expected US August PCE

Samsung, SK Hynix and Chip Suppliers Gain

"Korean Memory Stocks Have More Upside"

South Korean stocks got off to a strong start in the first trading session of the fourth quarter. Hopes that rising interest rates and oil prices are nearing a peak, along with Micron's record results and blockbuster September semiconductor export data, reinforced expectations for a memory upcycle. Semiconductor shares rallied across both large caps and smaller materials, parts and equipment makers, while pharmaceutical and biotech stocks also jumped, easing concerns over concentration in a handful of sectors.

Micron Says Shortages Will Deepen Through 2028

On Oct. 1, the Kospi closed up 1.95% at 6,971.35, rebounding for the first time in four sessions. The index fell more than 1% early in the day as retail investors dumped 1.4305 trillion won near the 7,000 level, where heavy supply had built up. Institutional buying later drove the recovery, helped by share buybacks and pension funds that had completed quarter-end rebalancing.

Foreign investors extended net selling to a fifth straight session, unloading 548.5 billion won on the main board, though selling pressure eased in the afternoon. On the Kosdaq, foreigners bought 227.8 billion won of shares and joined institutions, which were net buyers of 568.1 billion won, in lifting the market. The Kosdaq surged 4.48% to close at 894.29.

The initial catalyst for the rebound was easing pressure from inflation and oil. US personal consumption expenditures prices for August, released overnight, came in below market expectations. Oil jitters also subsided after reports that daily crude exports from the Middle East had recovered to 98% of prewar levels. The probability of another Federal Reserve rate increase this month fell to about 40% from 70% two days earlier.

Micron's record results gave the market breathing room after macro concerns had weighed on sentiment. The company posted its highest-ever quarterly earnings and gave revenue and earnings-per-share guidance for the current quarter that easily topped market expectations. Its gross margin guidance of 86.3% came in slightly below expectations because of higher performance-based compensation, which Micron described as a one-off factor.

Micron also lifted expectations for longer-term gains in the memory cycle. The company said supply and demand in memory and storage will be "much tighter" not only next year but through fiscal 2028. The share of long-term supply agreements, or SCAs, in revenue rose to 35% from 25% in the previous quarter.

Chip Materials and Equipment Makers Join the Rally

After Micron's earnings report, JPMorgan said Korean memory stocks have more room to run. Micron has recovered about 75% from its July low, while SK Hynix and Samsung Electronics have rebounded only 25% and 37%, respectively, the bank said. That leaves their upside to the late-June peak roughly three to six times greater.

Goldman Sachs and Hana Securities cut their third-quarter operating profit estimates for Samsung Electronics on Oct. 1, citing currency headwinds. Even so, both kept their price targets at 490,000 won and 480,000 won, respectively, saying the outlook for memory demand and pricing is strengthening. Samsung Electronics rose 2.8% and SK Hynix gained 3.2%.

The benefits of the chip boom have been even stronger among suppliers of materials, parts and equipment. TrendForce said lead times for ABF, a substrate material used in package boards, had stretched to 48 to 56 weeks, more than four times the normal 12-week lead time. That points to a more severe shortage than in memory, where lead times are running at 2.5 to three times normal.

While investors wait for a decisive breakout in large-cap memory names already viewed as having risen substantially, supplier stocks have moved first. Over the past month, Samsung Electronics has gained 3.5% and SK Hynix 7%. Over the same period, Hana Micron, which focuses on back-end processing, jumped 43%, Samwha Capacitor, a multilayer ceramic capacitor maker, climbed 41%, Wonik Holdings, a clean-room equipment company, advanced 41%, and Daeduck Electronics, a substrate maker, rose 32%.

Micron said on Oct. 1 that it sees no clear way for supply to catch up with shortages and plans to increase fiscal 2027 capital spending from its previous plan. Samsung Securities said expectations for investment have been building for more than a year and there is still further upside. The brokerage added that its positive view on semiconductor materials, parts and equipment stocks remains intact.

Bin Nan-sae, Hankyung reporter binthere@hankyung.com