Analysis: Excessive weighting of chip stocks pushes South Korean stock market into dangerous territory.

The global AI boom has pushed Samsung Electronics and SK Hynix’s stock prices to record highs this year, but the rally has also exposed the structural fragility of South Korea’s stock market, which is unaccustomed to sharp volatility. Together, Samsung and SK Hynix now hold a record 60% weighting in South Korea’s KOSPI index, up from around 40% two years ago. Last week, after a sharp market sell-off, regulators twice halted KOSPI trading to stabilize market confidence. Plans to launch large-cap stock options including SK Hynix have been delayed. One key concern is that retail investors are borrowing to buy Samsung and SK Hynix shares, exposing them to margin calls—where brokers demand additional cash if stock prices fall below a certain level. The over-concentration of market risk in these two stocks could also prompt institutional investors to pull back, amplifying downward pressure on share prices. Mathieu Lachet, head of equity research at Julius Baer, said recent market moves serve as an important reminder of concentration risk. When investor positions become crowded, periods of high volatility are to be expected.