Will semiconductors keep leading the market? US inflation data, SpaceX IPO loom as key risks

South Korean markets are set to focus on US inflation data and the SpaceX initial public offering next week, after the Kospi retreated from an all-time high. With the recent semiconductor rally centered on Samsung Electronics and SK Hynix showing signs of cooling, investors are asking whether the chip-led advance will continue or whether buying will rotate into sectors that have been left behind.

According to Korea Exchange, the Kospi closed Friday down 478.82 points, or 5.54 percent, at 8,160.59. For the week of June 1 through Friday, the Kospi fell 3.55 percent while the Kosdaq dropped 6.70 percent.

Analysts attributed the decline to profit-taking after the index hit a record high, compounded by a weaker-than-expected AI chip sales outlook from US chipmaker Broadcom that dampened semiconductor sentiment. Geopolitical tensions in the Middle East and caution ahead of US inflation data added to market volatility.

Analysts in the brokerage community, however, do not view the recent pullback as a trend reversal. The prevailing view is that it reflects a short-term correction after buying became overly concentrated in a handful of stocks during the index's climb.

"The rationale for the correction should be found in the price-to-earnings ratio-driven rally that resulted from stock concentration in May, rather than in war, oil prices or interest rates," said Lee Jae-won, a researcher at Yuanta Securities Korea. "Oil prices and interest rates are short-term headwinds, but they are more of a lagging justification for unwinding the overheating than the root cause of the correction."

Lee added that earnings estimates for the Kospi continue to be revised upward, led by the IT sector, and that semiconductor exports are maintaining solid growth. "The key for the June market is not a departure from leading stocks but a broadening rotation while those leaders hold their ground," he said.

The biggest variable next week is US inflation. The May consumer price index, due Wednesday, and the producer price index, due Thursday, will be the last major inflation readings before the Federal Open Market Committee meeting scheduled for June 17. With the recent rise in global oil prices stoking inflation concerns, the data could amplify market volatility depending on the outcome.

If inflation comes in higher than expected, rate-cut expectations could recede and market volatility could increase. Conversely, if price pressures stay within the range markets anticipate, analysts say the data could ease the burden on an index that has already pulled back.

"Behind the current inflation pickup is a rise in oil prices driven by fears of a Strait of Hormuz blockade," said Lee Sang-jun, a researcher at NH Investment. "Markets are in a position where they could react to inflation data with heightened sensitivity."

The SpaceX listing, widely regarded as the largest IPO in history, is another major variable. SpaceX is set to price its shares Thursday before listing on the Nasdaq on June 12. The company's valuation is estimated at $1.75 trillion to $2 trillion, with the offering expected to raise up to $75 billion — roughly three times the $26 billion raised in Saudi Aramco's 2019 IPO.

Analysts are watching whether the SpaceX listing could act as a global liquidity "black hole." Some warn that profit-taking pressure could build even in the Kospi, which has outperformed global peers in recent weeks. Korean ETF markets have already seen outflows of $570 million over five consecutive weeks.

"If the SpaceX listing draws closer, global liquidity flows could accelerate," said Lee Kyung-min, a researcher at Daishin Securities. "If capital exits with a clear destination in mind, it could stoke short-term volatility in the Kospi."

Analysts broadly expect buying that had been concentrated in semiconductors and AI-related stocks to disperse somewhat, giving rise to a rotation trade.

"Leading sectors may enter a short-term phase of cooling off and absorbing supply, but sidelined sectors could attempt a rebound from undervalued territory," Lee said, pointing to chemicals, energy, secondary batteries, pharmaceuticals and biotech, securities, cosmetics and apparel, construction, hotels and leisure, and banking as sectors worth watching.

Even so, the consensus view is that the market's center of gravity will remain within the AI value chain even if rotation occurs. "In the short term, some rotation may emerge as the concentration in semiconductors eases," said Jo Byeong-hyeon, a researcher at Daol Investment Securities. "Ultimately, however, the market's choices are likely to narrow to industries within the AI value chain where growth can outweigh the burden of interest rates."