Will the July Market Decline Improve in August? Semiconductor Decline, Should We Worry About a 'Cycle Peak'?

Summary

Han Sang-hee, Senior Research Fellow at Hanwha Investment & Securities, discusses whether the July semiconductor sell-off will continue into August. He argues that the CXMT IPO triggered indiscriminate but oversold memory stocks, that the memory cycle peak is not imminent because capex/sales ratios remain tame, and that non-memory semiconductors exhibit structurally superior trends. He also highlights US financials and Eli Lilly as attractive non‑AI plays, and expects liquidity to support a market bottoming process through late summer.

• CXMT IPO and 'circular reference' fears caused US memory stocks to fall, but SK hynix ADR premium normalised from excessive levels to around 15%, in line with TSMC.
• Memory cycle peak fears are premature: capex-to-sales for Micron and SK hynix remains far below historical danger zones, even if capex doubles next year, because revenues have surged.
• Non-memory semiconductors (SOX) show a 15‑year trend of rising profitability and multiples, making them a preferred buy over memory within the US market.
• US financials are recommended as a non‑AI barbell: improving NIM, stable credit costs, and minimal loan loss provisioning contradict recession narratives.
• Eli Lilly is singled out as a strong US pharma/biotech name that continues to perform well.
• The market bottoming process is expected to extend into late August until NVIDIA earnings and the Fed meeting provide more clarity.
• Korean market rotation remains difficult due to heavy concentration in Samsung Electronics and SK hynix, but historical patterns suggest eventual following of US breadth.