Memory semiconductors ranked as Korea’s second-best performing sector in June, yet many names weakened sharply in the final days of the month. Brokerage KB Securities cautioned that the recent pullback does not appear to stem from one clear catalyst. Instead, the firm pointed to a convergence of flow-driven selling and technical dynamics as the primary explanations.
Two specific technical drivers were highlighted by KB: the routine semiannual portfolio rebalancing that many institutional investors undertake, and the forthcoming inclusion of Elon Musk’s Space Exploration Technologies in the Nasdaq-100 index.
Portfolio rebalancing typically occurs when pension funds, mutual funds and ETFs reset asset allocations at the end of a half-year or quarter. In practice this process often involves trimming holdings in sectors or regions that have outperformed peers in order to restore target weights. KB strategist Euntaek Lee described these moves as "closer to mechanical selling aimed at restoring target weights than selling driven by a deteriorating market outlook."
Lee also noted a timing element tied to Korea’s National Pension Service. A grace period for the pension fund’s domestic stock rebalancing ends in late June, and KB expects foreign net selling of KOSPI shares to continue through year-end.
The second technical consideration is the scheduled July 7 inclusion of SpaceX in the Nasdaq-100. If added, SpaceX would sit among the six largest listed U.S. companies by market capitalization. Lee wrote that the inclusion could create selling pressure on existing index constituents as investors reposition ahead of the effective date. At the same time, Morningstar’s estimate that SpaceX will account for only about 1.8% to 2.6% of the Nasdaq-100 based on its free float suggests that any dislocation may be limited. As Lee put it, that pressure "should fade once the index adjustment is completed."
Market participants have cited several other potential explanations for the memory stock weakness. KB’s strategist addressed three commonly mentioned factors: concerns about AI-related spending, plans for large-scale increases in memory capacity, and a DRAM price-fixing class-action lawsuit filed in a California court.
On the litigation front, Lee said he does not view the class-action case as "significant enough to materially affect the memory sector," stressing that an antitrust outcome depends on concrete evidence of collusion rather than on observed price increases alone.
Regarding AI investment, KB does not see current conditions as a turning point. "If the question is whether AI investment is beginning to roll over, our answer remains no," Lee wrote, indicating that fears of an imminent slowdown in AI capex are not supported by the firm’s reading of the data.
Technical positioning also earned attention. During the preceding rally, shares of Samsung Electronics and SK Hynix had traded well above their 30-day moving averages, a condition KB characterized as "stretched." The strategist flagged this as one of the key drivers behind the correction, suggesting that the market had become overextended from a momentum standpoint.
Taken together, KB’s view is that the recent weakness reflects "portfolio normalization" rather than a deterioration in industry fundamentals. The firm expects the combined pressures from rebalancing flows and overextended technical positioning to subside after early July, as index adjustments conclude and allocation-related selling eases.
Key takeaways
- Memory semiconductors were among Korea’s best performers in June but fell back late in the month amid a mix of mechanical flows and technical corrections.
- Semiannual portfolio rebalancing and SpaceX’s planned entry to the Nasdaq-100 on July 7 were highlighted as two prominent technical drivers of selling pressure.
- KB does not view a DRAM class-action suit or current AI spending patterns as decisive threats to the sector’s fundamentals; the firm expects rebalancing-related pressure and stretched positioning to ease after early July.
Sectors impacted - Memory semiconductors, the broader Korean equity market (KOSPI), and U.S. index constituents that may be adjusted ahead of SpaceX’s Nasdaq-100 inclusion.
Risks and uncertainties
- Rebalancing-related selling could persist through the end of the year, as KB expects foreign net selling of KOSPI shares to continue - this would primarily affect Korean equities and sectors that outperformed in recent months.
- Index reconstitution around SpaceX’s Nasdaq-100 inclusion may generate temporary selling pressure on existing constituents until the adjustment is complete.
- Legal proceedings such as the DRAM class-action lawsuit remain active; while KB regards the case as unlikely to materially affect the sector, antitrust outcomes depend on specific evidence and thus retain some uncertainty.