Kim Yong-beom says CXMT listing, lithography advances worth watching amid market plunge

Kim Yong-beom, chief of the presidential policy office at Cheong Wa Dae, said Tuesday local time that the listing of China's CXMT and China's independent development of lithography equipment manufacturing technology were among the factors behind the Korean stock market's sharp drop into the 6,000-point range.

Speaking at a briefing for Korean reporters at a press center in São Paulo, Brazil, Kim said CXMT's share price surged on its first day of trading, raising questions about whether South Korea's two dominant memory chip makers can maintain their competitive edge. "The question of whether the gap in memory chips between CXMT and Korea's two leading companies will remain as safe as it is now, and the newly emerging lithography equipment issue — that is how I see it," he said.

Kim also said the market appears to be engaged in an internal debate over the sustainability of global semiconductor demand. "There is a growing sense of skepticism about whether the massive, eye-catching investments by the so-called big tech companies leading this AI revolution are truly sustainable as a business model — whether they can be leveraged into something lasting," he said. "Semiconductor demand has been rising on a relative basis, but there is no certainty that all of that demand will hold up going forward."

He added that from China's perspective, CXMT and Yangtze Memory Technologies represent the country's full national effort. "China is nurturing these companies at the state level," he said. "From their side, they will do whatever it takes to build up their companies, and one could say they are making rapid advances because China has strengths in technology and related areas."

Kim said the market correction reinforced his view that South Korea needs to sharpen its focus. "Looking at this correction, I am more convinced than ever that we need to get serious — building factories, investing at the right time, and stepping up R&D — for our two memory chip companies," he said.

Kim also pointed to structural characteristics of South Korea's capital market as a driver of the recent surge in volatility. "The reason volatility is so high in Korea is that retail investors make up a large share of the domestic market, they invest very dynamically, there are many related derivatives products, and these two companies account for an extremely large share of the market — all of these characteristics are interacting to amplify volatility," he said.

He added that the turbulence of the past two to three months has not been unique to Korea. "The debate surrounding the broader situation for semiconductor and AI stocks has been ongoing," he said. "I do not think actual demand or the uses of AI are temporary. I expect demand to remain solid. I see this as a process of finding some kind of equilibrium."

Kim also said leveraged ETFs alone do not explain all of the current market volatility. "Leveraged ETFs have stood out since late May, and a lot of people talk as if all the problems come down to that one thing — but that is not necessarily the case," he said, reiterating that structural characteristics of South Korea's secondary capital market have also contributed to amplifying volatility.

Kim said the Financial Services Commission is continuing to make supplementary and additional improvements to the leveraged ETF regime, and said officials would take a close look at the composition and investor makeup of derivatives and ETFs.

He went on to say the government would monitor market conditions and conduct a broader review. "A structure where semiconductors and AI stocks account for 40 to 50 percent of the market will continue going forward," he said. "When volatility hits the highest levels in the world every time that happens, it is quite worrying for investors. The Financial Services Commission should conduct a comprehensive review of all the structural factors driving in particular high volatility — not just leveraged ETFs."