Kospi Surges Over 4% Amid Leverage-ETF Volatility as SK Hynix ADR Listing Fuels Optimism

The Kospi extended gains through the session to close up roughly 4%, nearing the 7,600 mark, while the Kosdaq surged about 6% to top 840. Almost none of the top 50 market-cap stocks on the Kospi finished lower, with gains broad-based across sectors. The won held relatively steady around 1,506 per dollar.

Foreign investors sold Kospi and Kosdaq cash equities while buying index futures, a split flow, while institutions were net buyers on both boards. However, panelists noted most institutional buying came from ETF-linked financial-investment accounts hedging retail ETF purchases rather than genuine bargain-hunting.

Panelists observed that trading-volume leaders in recent sessions have overwhelmingly been leveraged and inverse ETF products, distorting how genuine good or bad news gets reflected in prices as mechanical ETF flows whipsaw the index. With the Kospi down roughly 20% from its peak, they warned that actual investor losses often feel far larger than the headline index decline suggests.

Despite the day's rally, unease persisted among market participants, with some warning the index could swing from a 4% gain to a 3% loss within a single session. Panelists urged viewing this volatility itself as a warning sign rather than a buying opportunity.

SK Hynix priced its Nasdaq ADR at $149, roughly a 3.1% premium to Thursday's Korean market close. The stock jumped about 3% in after-hours trading immediately following the announcement. Institutional demand reached about seven times the offering, drawing over $2 billion in orders from more than 500 institutions, with the top 25 accounts taking 67% of the allocation. Each ADR represents 10 common shares, and ADRs cannot be directly exchanged for local shares. The underlying stock traded up 1-2% around 2.22 million won.

A heartwarming story about Samsung Electronics Chairman Lee Jae-yong also circulated: after a cleaning worker who had served at Samsung's Seocho headquarters for over two decades passed away, Lee reportedly cancelled his schedule to pay respects alone at the funeral, drawing praise for a shift in corporate culture.

Defense stocks were a focal point in a discussion with LS Securities analyst Lee Jae-kwang. Hanwha Aerospace and Hyundai Rotem already show solid earnings and margins, making their forward-looking valuations look comparatively low, while LIG Nex1 and Korea Aerospace Industries (KAI) appear undervalued when measured against order backlog relative to enterprise value. He cautioned against over-reading quarterly results in a project-based industry, advising investors instead to track order-backlog trends.

Biotech names diverged sharply. Peptron plunged to the daily limit down after its CEO suggested at an industry event that the compound behind its Eli Lilly collaboration wasn't the widely expected tirzepatide. HLB also hit the limit down after receiving its third FDA complete-response letter for gastric cancer drug rivoceranib. Still, news that ProteinaCore signed a follow-on licensing deal with Samsung Biologics limited contagion to other biotech names, and bargain-hunting emerged after the Kosdaq briefly dipped into the 700s, helping the broader sector hold up relatively well.

Panelists traced a sequential bottleneck pattern spreading across the AI industry: Nvidia GPUs were the initial constraint for generative AI training, followed by memory shortages expected to persist given limited capacity expansion through next year. As focus shifted to inference, CPUs emerged as the next bottleneck, followed by advanced packaging and TSMC-related substrate materials, MLCCs, and power semiconductors.

In today's session, optical communications and semiconductor equipment stocks — identified as the next stage in this rotation — rallied sharply. Bitgwa Electronics hit the daily limit up, while Daehan Optical Communication surged about 23% and Korea Advanced Materials climbed roughly 19%.

Panelists framed this sequential spillover as typical of an industry boom but cautioned that investors sometimes mistake such diffusion for a market top. Drawing a parallel to past cycles where construction stocks rose, followed by cement, construction equipment, and furniture/building-materials stocks, they noted that a true peak only comes once front-end demand actually declines — not simply because the rally has spread. With upstream AI chip demand and investment still expanding, they said it's premature to call a top.

SK Hynix said it plans to use part of the roughly $26.5 billion (about 35 trillion won) raised from its ADR listing to fund back-end investments in Gwangju and South Jeolla, and will convert currency for the purpose — a move seen as supportive for the won.

Meanwhile, Bloomberg reported that US Commerce Secretary Howard Lutnick, speaking at a Micron Technology groundbreaking event, pressed Samsung Electronics and SK Hynix to build more factories in the United States, seen as a pointed remark given SK Hynix's plan to redirect US-raised capital toward Korean investment.

SK Group Chairman Chey Tae-won reportedly traveled to the US to attend SK Hynix's Nasdaq opening-bell ceremony, while Samsung Electronics Chairman Lee Jae-yong is expected to meet Nvidia CEO Jensen Huang again later this month, fueling speculation about expanded Gwangju investment and potential Nvidia investment in Korea. Domestic semiconductor equipment stocks rallied on the news.

Reports circulating from Yeouido the previous day of possible leveraged-ETF restrictions — including higher minimum deposits, mandatory investor education, and daily price-move caps — were denied as unconfirmed by financial authorities, who said they would comprehensively review the causes of volatility to minimize investor harm.

With the Financial Services Commission's presidential policy briefing scheduled for Wednesday, July 15, markets widely expect leveraged-ETF measures to be unveiled then. Policy Chief Kim Yong-beom said Friday morning that leveraged ETFs would be supplemented if needed, with a decision to come from a market-monitoring meeting involving the finance ministry, FSC, Bank of Korea, and Financial Supervisory Service.

Host Lee Kwang-soo argued that leveraged and inverse ETFs are excessively amplifying market volatility, and that regulators should halt trading first and debate solutions afterward, since the market could deteriorate further while discussions drag on. He described the world's fifth-largest market swinging 7-8% intraday as effectively a gambling floor, distorting how fundamentals and news are reflected in prices.

He specifically pointed to a structural incentive to game the market: an investor who sells a large block of the underlying stock while simultaneously buying inverse-leveraged products profits more as the sell-off deepens. He noted evidence that foreign investors' recent net selling has coincided with buying of leveraged products, suggesting this dynamic may already be at play.

His deepest concern was that repeated volatility could push retail investors back toward viewing Korean equities as a gambling table, eroding the healthy investing culture built up in recent years. He also noted that derivative trading volume in Korea vastly exceeds underlying-stock volume compared to markets like Nasdaq, arguing regulators should suspend trading immediately and address legal gaps and investor compensation afterward.

At the same time, he stressed that this structural issue doesn't undermine the fundamentals or growth stories of Korea's leading companies, urging investors not to panic-sell. He advised against overextending into new positions and recommended setting a predetermined loss threshold with a disciplined stop-loss plan.