Is It Really Overheating? The Key Is Profit Scale | Lee Jaeman, Head of Global Investment Analysis, Hana Securities Research Center

Summary

Lee Jaeman from Hana Securities dissects the 10% KOSPI crash as a supply-driven event, not a fundamental breakdown. He presents a market cap-based overheating framework using historical Cisco parallels and argues that the Korean market has already bottomed. The core of the discussion shifts to a rigorous quantitative screen: in a high-rate world, buy stocks with rising earnings estimates, strong quarter-over-quarter growth, and improving margins, which points overwhelmingly to semiconductors and select defense/power equipment names.

• The 10% KOSPI drop was caused by ETF rebalancing and leveraged ETF flows, not fundamental weakness.
• Price adjustment is largely over; KOSPI likely bottomed near 7,900–8,000 and should recover to prior highs guided by earnings.
• A key overheating signal: if SK hynix overtakes Samsung Electronics in market cap without matching its profit scale, similar to Cisco vs Microsoft/GE in 1999–2000.
• In a high interest rate environment, the strategy is to buy companies with upward EPS revisions, strong QoQ growth, and improving operating margins.
• Applying this screen to US stocks yields Broadcom, Micron Technology, and AMD; NVIDIA is excluded due to lower QoQ EPS growth.
• The same screen for Korea gives Samsung Electronics, SK hynix, Samsung Electro-Mechanics, plus aerospace/defense and power equipment names like Korea Aerospace Industries and Hyosung Advanced Materials.
• Hanmi Semiconductor stands out for extreme margin improvement approaching 50%, justifying its high valuation.
• No major sector rotation is occurring yet; semiconductor hardware continues to dominate both the US and Korean markets.