Kospi Plunges 8%, Triggers Circuit Breaker and Sell-Side Sidecar as Semiconductor Volatility Rattles Retail Investors

The Kospi fell as much as roughly 8% intraday, sliding into the 8,170-8,288 range. After the drop held above 8% for a full minute, a circuit breaker halted all Kospi cash and related derivatives trading for 20 minutes; the index failed to fully recover even after trading resumed. Foreigners dumped roughly 3 trillion won worth of stock and institutions sold 600-700 billion won, with financial investment firms and the National Pension Service identified as the main institutional sellers.

The Kosdaq fell a milder 4-5%, with foreigners and institutions actually turning net buyers there, a striking contrast to the Kospi. Advancing issues on the Kospi numbered only about 60-70, underscoring how broadly the market was suppressed; the Kosdaq saw roughly 130 gainers. Most large-cap names posted losses ranging from 15% to as much as 45%.

The won weakened further as the dollar index climbed past 101, reflecting anxiety over U.S. interest rates. Hosts attributed the day's extreme swing to the compounding of leveraged products and ETF mechanical selling. When bellwether stocks fall more than 5%, the index drops, which triggers programmatic ETF basket selling, which in turn drags individual names down further in a self-reinforcing loop.

Leverage multipliers embedded in leveraged ETFs amplify this cycle further, pushing Korean market swings well beyond those seen in Japan or Taiwan, the hosts noted. They stressed that such amplified volatility is no longer a one-off event but has become a structural feature investors must now factor into every trading day.

The hosts also criticized how the National Pension Service executes its trading. In principle, pension money should stabilize the market by selling when prices overshoot and buying when they overcorrect. In practice, the outsourced asset managers chase relative performance against peers, which ends up amplifying volatility rather than dampening it.

Shares initially rallied on news that the National Growth Fund would invest in LegoChem Biosciences and LIG Defense & Aerospace, but reversed sharply once the details emerged. LegoChem Bio dropped more than 10% to around the 140,000-won level. The structure involved a third-party allotment of 330 billion won in convertible preferred stock — 160 billion won from the Korea Development Bank and 125 billion won from Orion Holdings — with a conversion price of 149,300 won and a payment date of July 24.

Hosts noted it was abnormal for the stock to trade below that conversion price, which effectively functions as a floor implicitly endorsed by the government and major investors. They speculated the market may have interpreted the debt-like structure as a signal of cash-flow concerns, though LegoChem Bio itself said same-day that its cash position was sound and the funding was for proactive investment.

Semiconductor equipment makers rallied on optimism around the Gwangju-Jeonnam cluster: TES rose about 10%, PSK about 7%, and Wonik IPS about 6%, with intraday highs of roughly 12% and 7% respectively. Among Kosdaq large caps, chip-equipment names were among the few holding up against the broader selloff.

Regional theme plays in Honam also surged, with Gwangju Shinsegae and Kumho Group affiliates hitting the daily upper limit and Kumho Tire jumping more than 21%. Hosts advised screening such names on three criteria — profitability, relatively low price-to-book, and a genuine direct link to the investment story — warning against chasing speculative names connected by only a loose, two-steps-removed association.

Department store and cosmetics names were flagged as beneficiaries of the inbound tourism boom; even amid the broad selloff, department store shares briefly held gains of about 5% intraday. Hosts urged investors to identify domestic defensive alternatives the way U.S. investors rotate into healthcare when tech sells off.

The trigger for the day's selloff was Apple's announcement that it was raising MacBook and iPad prices, citing rising memory chip costs. Apple shares fell roughly 6% on the news, and the market seized on two distinct worries — that higher device prices could dampen consumer demand, and that weaker demand could in turn crimp memory chip orders. Investors grew skeptical that the current pace of memory price hikes was sustainable.

The shock spread across Asian chip stocks. In Japan, Kioxia fell more than 9%, SoftBank more than 12%, Advantest around 9%, and Murata about 7%. By contrast, Micron's earnings released the previous day had beaten expectations on both revenue and margin, with management expressing confidence in continued strong demand — underpinning a still-bullish long-term case for the chip cycle.

The hosts framed the day as the first time the market clearly separated the fate of chip 'suppliers,' who can keep raising prices, from chip 'buyers' among Big Tech, who must absorb costs by passing them to consumers, sacrificing margin, or delaying production and launches. They cautioned this reflects a split within the AI ecosystem, not an end to the broader AI investment cycle.

With Big Tech earnings season looming — Alphabet reporting July 22 and Meta around July 29 — hosts warned the uncertainty could persist for roughly a month. Excluding chipmakers, the rest of the Magnificent Seven had already pulled back roughly 10% recently, with chips alone rallying — an unusual decoupling now visible even in the U.S. market.

Meanwhile, reports emerged of Samsung Electronics and SK Hynix planning a major semiconductor cluster investment in the Gwangju-Jeonnam region, alongside news of a meeting between Samsung Chairman Lee Jae-yong and the president, and SK Chairman Chey Tae-won reportedly reviewing renewable-energy and power infrastructure investments.

Host Kwon Soon-woo repeatedly cited a chart showing consumer sentiment tracking export growth almost in lockstep, arguing that with chips accounting for nearly half of Korea's exports and over half of Kospi market cap, chip-sector strength translates almost directly into consumer sentiment. A chip boom lifts trade surplus and GDP growth expectations, which in turn boosts household stock-portfolio balances and consumer confidence.

The government's roughly 26 trillion won first-half supplementary budget, combined with expected trillion-won-scale performance bonuses at SK Hynix and elsewhere, was cited as another tailwind for consumption. While regular wage and self-employment income leaves little room for discretionary spending, investment gains that swell account balances tend to sharply boost consumer confidence, he argued.

Co-host Kwon Dae-han pushed back, questioning whether chip-sector strength really translates into broader consumption given the industry's narrow direct footprint. Kwon Soon-woo responded that chip strength is ultimately a proxy for overall global growth, and that Korea's export-heavy economy tends to see other sectors, including autos, strengthen alongside chips — citing 2017 and 2021 as precedents where consumption rose in tandem with the chip cycle.

Park Si-dong offered a counterpoint, tracing Apple's operating margin history to argue that no industry enjoys permanent dominance. He cited Nokia, the world's dominant handset maker before the iPhone, which dismissed the smartphone wave as a bubble and was ultimately wiped out of the market — a cautionary parallel for today's chip boom and Korean companies riding it.

Kwon Soon-woo pointed to a fresh, unprecedented growth driver for domestic-facing companies: foreign tourist arrivals. Last year's roughly 19 million visitors marked the first full recovery to pre-pandemic levels, with about 23 million expected this year. The government's target of 30 million by 2029 looks achievable at the current pace.

From January through April this year, cumulative foreign arrivals reached 6.77 million, up 21% year-on-year, while their total spending jumped 41% over the same period — roughly double the pace of visitor growth. A weaker won, delivering roughly 60% more purchasing power per dollar than a year earlier, was cited as a key driver of the outsized spending increase.

The nationality mix is also diversifying: China's dominant share has faded, with China and Japan combined now accounting for under 50% of arrivals, while the United States, Europe, and Taiwan gain share. Long-haul flight tickets to Korea reportedly topped global sales rankings, reinforcing the narrative that Korea's appeal now extends beyond semiconductors into tourism.

A National Land and Space Transformation public-private meeting chaired by President Lee Jae-myung, scheduled for Monday, is expected to unveil a large-scale semiconductor investment plan for the Honam region by Samsung Electronics and SK Hynix. Candidate sites include the Advanced 3rd Industrial Complex, Haenam Solar Sido, and the Gwangju Airport site; a presidential office official reportedly previewed that the investment figure would exceed market expectations. Equipment-order expectations ahead of any new fab lifted TES, PSK, and Wonik IPS.

Kwon Soon-woo called the move significant on three fronts: domestic chipmakers, long criticized for low return on equity from hoarding cash, are finally reinvesting profits; the investment is directed domestically rather than overseas; and it concentrates in the relatively underdeveloped Honam region. He argued that, unlike past regional-development spending diluted by political horse-trading across multiple provinces, this concentrated chip-cluster investment — anchored by power and water infrastructure — could become a model case.

The National Growth Fund's first investments — in LegoChem Biosciences and LIG Defense & Aerospace — also drew policy attention as the government's first direct selection of promising firms, seen as a credibility-conferring endorsement. That said, the market's muted reaction, given the funding came via convertible preferred stock rather than an outright equity stake, was noted as a limitation.

Hosts also called for reform of the National Pension Service's market-stabilizing role, noting that the public ETF market consists only of mechanically index-tracking passive funds, while active strategies that could buy dips and dampen volatility remain confined to the private-fund space. They cited cases where ETFs were delisted for outperforming their benchmark by too wide a margin, flagging institutional reform as a longer-term priority.

Lee Kwang-soo reiterated that he had called for a chip-driven rally as early as September-October last year, restating his thesis that since chips account for nearly half of Korea's exports and over half of Kospi market cap, a chip boom directly drives export gains, trade surplus improvement, and upward GDP revisions, which in turn feed into consumer sentiment.

He emphasized that a stronger Kospi alone, by lifting household portfolio balances, boosts consumers' sense of spending power — an effect that will be reinforced further by trillion-won-scale performance bonuses expected at SK Hynix and elsewhere.

However, he pointed to excessive volatility in bellwether chip stocks as the reason this virtuous cycle isn't playing out smoothly. Abnormal overselling — such as LegoChem Bio trading below its conversion price, effectively a floor implicitly endorsed by the government and major investors — is, in his view, the root cause preventing investors from confidently rotating into second-tier follow-on plays.

He argued that leverage and mechanical ETF selling act as an amplifier, and that bellwether-stock swings are breaking the chain of thematic rotation that should otherwise spread gains across the market. With diverse-strategy funds having largely disappeared and capital concentrated almost entirely in chips, he called for pension funds and institutional investors to restore their role as seed capital across a broader range of strategies.

Park Si-dong traced Apple's operating margin since 2005, noting that Apple sustained margins in the 30% range for roughly 15 years after the iPhone's launch — and is now entering a new phase marked by price hikes driven by rising memory costs. He framed this as an open question over whether Apple can sustain its historically high profitability or is heading toward a different kind of transition.

He detailed the cautionary case of Nokia, the dominant handset maker before the iPhone, which dismissed the smartphone wave as a bubble and chose to wait it out — only to be pushed entirely out of the market. He drew a parallel to Apple's current cautious stance on AI investment, attributed to the belief that AI models will commoditize, making in-house investment unnecessary, and to a strategy of waiting for the investment bubble to deflate before buying in cheaply.

By contrast, Microsoft, Meta, Oracle, and Alphabet are aggressively expanding AI investment, even tapping bond issuance and equity raises to fund it. He flagged their upcoming late-July earnings as a critical inflection point that will reveal whether Apple's cautious approach or Big Tech's aggressive investment strategy was the right call.

Quoting Steve Jobs's 'stay hungry, stay foolish,' he questioned whether today's Apple — and Korean companies alike — still embody that spirit. He cited Samsung Electronics' and SK Hynix's Honam investment decision as a positive counter-example of proactively investing in the future rather than waiting on the sidelines.