Policy-Driven, Supply-Demand Fueled Artificial Bull Market: The Weakest Link is Individual Investors' Debt

The Semiconductor Boom is Real, But the Current Stock Market Cannot Be Explained Solely by Industry Tailwinds

An Artificial Bull Market Driven by Policy and Supply-Demand Fueled by BlackRock's EWY, National Pension's Portfolio Adjustments, and Real Estate Suppression

Before the Local Elections, Individual Investors Should First Examine Their Leverage Ratio, Not Their Stock Holdings

Ahead of the local elections on June 3, 2026, the Korean stock market is surging uncontrollably. On the surface, there is a semiconductor boom.

The demand for Artificial Intelligence (AI) servers, expansion of High Bandwidth Memory (HBM), rising memory prices, and earnings expectations for Samsung Electronics and SK Hynix are presented as justifications for the index's rise.

This does not mean there are no industrial tailwinds. The question is whether these tailwinds can fully explain the current bull market.

The essence of the current market is not simply an earnings-driven rally.

On the spark of the semiconductor boom, global passive funds, National Pension's portfolio adjustments, the government's real estate suppression policies, and individual credit investment have all converged.

Industrial tailwinds were the starting point, but policy and supply-demand fueled the bull market. Therefore, the current stock market is closer to a policy-and-supply-demand-driven artificial bull market than a normal upward trend.

Tailwinds Originated in Semiconductors, but the Bull Market Was Fueled by Supply and Demand

The primary justification for the rise in the Korean stock market is semiconductors. The expansion of AI data centers has increased demand for HBM and server DRAM (Dynamic Random-Access Memory), and the rise in prices for high-performance memory has boosted earnings expectations for Samsung Electronics and SK Hynix. This is clearly a real-economy tailwind.

However, the rise in memory prices and the rise in actual demand must be viewed separately.

Market research firm TrendForce forecasts that contract prices for general DRAM in the second quarter of 2026 will rise by 58-63% compared to the previous quarter, and contract prices for NAND Flash (non-volatile storage memory) will increase by 70-75%.

At the same time, they analyzed that suppliers are reallocating production capacity to HBM and server products, and consumer products may face shipment pressures due to price increases.

In other words, price increases do not necessarily indicate a widespread surge in demand.

The current semiconductor boom is a market characterized by a combination of selective demand boom centered on AI servers and price boom due to tight supply.

HBM and high-value server memory are clear strengths for Korean companies. However, for general DRAM and NAND used in consumer electronics, entry-level smartphones, PCs, and consumer SSDs, Chinese companies are already producing them. As prices rise, the pressure to replace them with Chinese products may increase in the general memory market.

Therefore, interpreting the sharp rise in the entire Korean stock market as a normal upward trend based solely on the fact that "memory prices are rising" is dangerous.

While the semiconductor tailwinds are real, their scope is narrow. The problem is that too much money has piled onto this narrow tailwind all at once.

BlackRock's EWY, the National Pension, and Real Estate Suppression Moved in the Same Direction

One of the key channels for foreign capital is BlackRock's iShares MSCI South Korea ETF (EWY - an exchange-traded fund listed in the US that tracks the Korean stock market). MSCI stands for Morgan Stanley Capital International, a global stock index provider.

According to BlackRock's official materials, EWY is a product that tracks the investment performance of an index composed of Korean stocks, and it is described as providing exposure to large and mid-cap Korean stocks and as a means of expressing a single-country view on Korean equities.

EWY is not a product for picking and investing in individual companies long-term. It is an index-based channel for buying and selling the Korean stock market as a whole. When this product flows in, it becomes a quick channel to buy the Korean stock market. However, it also becomes a quick channel to sell the Korean stock market when it flows out.

The internal structure of EWY is also important. According to ETFDB, the top holdings in EWY are Samsung Electronics at 28.61% and SK Hynix at 19.87%. These two stocks alone account for approximately 48.5%. The top 10 holdings represent 63.95%.

Ultimately, EWY fund inflows represent investment in the entire Korean stock market, while also having a betting characteristic on large-cap semiconductor stocks as an index.

In addition, the National Pension's adjustments are also intertwined.

The government lowered the target proportion for the National Pension's overseas stocks from the initial 38.9% to 37.2% for 2026, and raised the target proportion for domestic stocks from 14.4% to 14.9%. Rebalancing was also temporarily deferred due to its significant market impact.

This does not mean the National Pension directly pushed up the index every day. However, it clearly reduced selling pressure on domestic stocks and sent a favorable policy signal to the domestic market.

Another pillar is real estate.

The government has defined and suppressed expectations of rising real estate prices as speculation. Conversely, inflows into the stock market have been framed as "productive finance." However, in terms of the nature of money, the question changes.

If betting on rising real estate prices is speculation, what is betting on rising stock prices?

If deposits and cash are decreasing, margin trading is increasing, and individual funds are following the expectation of index increases, this is closer to a price bet than an investment.

The Seoul Shinmun reported on the 6th that household cash and deposit ratios have fallen to the low 40% range, and with a surge in investor deposits and margin trading, financial authorities are considering issuing a warning about asset concentration.

This indicates that the nature of individual funds is shifting from investing surplus funds to chasing risky assets.

Institutions Buy with Awareness, Individuals Follow Blindly

Institutions are not unaware of this risk. They know that the semiconductor boom is selective, that the rise in memory prices and actual demand must be separated, and that if passive funds like EWY withdraw, large-cap Korean stocks could be shaken first.

Despite this, institutions are buying. They cannot afford to lag behind the benchmark index while the market is rising, and they cannot entirely go against the trend created by foreign passive funds.

Institutional buying does not necessarily imply conviction. Sometimes it is tracking, sometimes hedging, and sometimes defending performance.

Individuals are different. Individuals chase the market late after seeing prices rise.

Especially for individuals who entered through margin trading, their options rapidly decrease the moment a downturn begins. If stock prices fall below a certain level, securities firms' collateral ratio management and forced liquidations kick in.

From then on, the market becomes a liquidation machine rather than a space for judgment.

The risk in the current market is not that "institutions are unaware of the risk." Rather, institutions are aware of the risk.

However, institutions manage and follow the risk, while individuals embrace the risk and follow. This is why this bull market is more unstable.

Before the Local Elections, Individuals Should First Reduce Their Debt, Not Their Stocks

The political schedule cannot be excluded from this market phase. The 9th National Simultaneous Local Elections are scheduled for June 3, 2026. If the stock market surges before the elections, the government can highlight its economic performance.

Branding real estate as speculation to suppress capital and framing the stock market as "productive finance" is also advantageous for managing economic sentiment before the elections.

Moreover, policy cooperation between BlackRock and the Korean government is also overlapping.

President Lee Jae-myung met with BlackRock Chairman Larry Fink in New York in September 2025 to discuss cooperation in AI and renewable energy, and the Ministry of Science and ICT and BlackRock signed a Memorandum of Understanding (MOU) for Global Partnership in the AI Industry. This MOU included cooperation in AI demand response infrastructure, renewable energy, and AI capability expansion.

Subsequently, VENA Group announced its intention to invest approximately KRW 20 trillion, including the establishment of renewable energy and AI data centers in Korea.

The government explained this as the first tangible outcome of the AI and renewable energy investment cooperation MOU signed following President Lee Jae-myung's visit to the US and his meeting with BlackRock Chairman Larry Fink.

It is impossible to assert illegal collusion.

However, there is a clear policy-fund connection where policy cooperation and fund inflows have moved in the same direction.

BlackRock showed interest in Korea's AI and renewable energy infrastructure, and fund inflows into the Korean stock market through EWY became a major supply-demand driver for the rise in the Korean stock market.

The government increased the proportion of domestic stocks in the National Pension and created an environment that induces the movement of domestic funds into the stock market by suppressing real estate.

This is why it is difficult to view this market phase as a simple, normal rally.

The semiconductor boom is real. However, on top of that boom, the political schedule, government policies, global passive funds, National Pension portfolio adjustments, and individual debt-fueled investments have all converged.

This is not a market explained solely by industrial booms, but a policy-and-supply-demand-driven artificial bull market.

Therefore, what individual investors need is not fear, but consolidation.

Especially before the local elections, what individuals should first examine is not their entire stock holdings, but the proportion of stocks bought with borrowed money. Stocks bought with cash can be weathered with judgment and time. However, for margin trading, short-selling, leveraged ETFs, and short-term borrowed funds, forced liquidation rules take precedence over investor will in a downturn.

Now is not the time to push for higher returns, but to reduce risk exposure.

The semiconductor boom may continue. However, if even small signs of abnormality emerge in AI investment and HBM demand, or if foreign passive funds like EWY change direction, the market can change rapidly.

At that time, foreigners and institutions will be the first to be able to exit. Individuals who followed with debt are most likely to be left behind.

The Conclusion is Clear

Individual investors must first consolidate their debt-fueled investments before the local elections.

Whether to hold stocks is a matter of individual judgment. However, stocks bought with debt are different.

A bull market created by policy and supply-demand appears as an opportunity for everyone when it rises, but it breaks at its weakest links when it turns.

The weakest link in the current Korean stock market is not semiconductors, but individual investors who have ridden the wave with credit, believing in the semiconductor boom.

Checkpoints

First, observe whether fund inflows into Korean ETFs like EWY continue. A slowdown in net inflows or a shift to net outflows could signal a change in direction for foreign passive funds.

Second, monitor whether the stock prices of Samsung Electronics and SK Hynix falter before the index. If major semiconductor stocks turn downwards, the entire index is likely to follow.

Third, track the balance of individual margin trading and the scale of forced liquidations. Even if the index holds steady, if margin trading does not decrease, the impact of a downturn could be greater.

Fourth, pay attention to government statements regarding the stock market and signals related to the National Pension's operations. It is necessary to confirm whether policy messages continue to stimulate market sentiment in a favorable direction before the elections.

※ This report is not an offer to buy or sell specific stocks or exchange-traded funds (ETFs). It is a market structure analysis for understanding purposes, and actual stock prices and market movements may vary depending on semiconductor industry conditions, exchange rates, interest rates, foreign capital flows, policy variables, etc. Individual investors should assess their risk based on the nature of their funds and leverage ratio.