Samsung Electronics Posts Record Profit, Yet Kospi Plunges 6% as ETF-Leverage Sell-off Domino Takes Hold

The Kospi fell as much as 6% intraday, dropping to around 7,458 points, while the Kosdaq slid roughly 3% to near 820 points. Both benchmarks closed near their intraday lows. Samsung Electronics and SK hynix each tumbled about 9%, dragging the broader index down.

On the flow side, foreign investors net sold about 2.7 trillion won on the Kospi, while institutions also sold a net 160 billion won. Pension funds within the institutional bucket, however, posted a marginal net buy of 9.6 billion won. The Kosdaq saw both foreign and institutional investors turn net buyers, a notable contrast. The won-dollar exchange rate hovered around 1,525 won.

As losses deepened, a sidecar circuit halt was triggered during the session. The Wall Street Journal warned that Korea's stock market could turn into a "Squid Game," citing the market's concentration in Samsung Electronics and SK hynix, leverage products, and foreign capital outflows. Advancing issues numbered only around 200 on the Kospi, vastly outnumbered by decliners.

Discussion also turned to second-half strategy. Analysts noted that many variables — the Fed's policy stance, upcoming big tech earnings, and confirmation of hyperscaler capital expenditure — remain unverified. In a high-volatility environment, keeping cash allocation in the 70:30 range was advised to allow flexible buying on dips and selling on rallies. A suggested portfolio split half of equity exposure toward AI/electronics names and half toward defensive sectors such as financials, shipbuilding, and defense.

All three major US indexes closed higher. The Dow Jones Industrial Average finished only modestly up but briefly topped 53,000 intraday for the first time in its history, while the Nasdaq Composite gained more than 1%, the S&P 500 rose 0.7%, and the Russell 2000 added 0.4%.

Early trading saw bargain-hunting flow back into chip stocks, the epicenter of last Thursday's sharp selloff, with AMD surging nearly 10% intraday before giving back most of the gain. Flows later rotated into large-cap tech names such as Meta, Alphabet (Google) and Tesla, which had lagged earlier, sapping momentum from semiconductors.

The 10-year Treasury yield eased slightly to 4.46%, showing stability, while crude oil traded largely flat around $68 a barrel as tensions with Iran remained in a roughly week-long lull.

The dollar index briefly slipped before holding the 100 level, closing at 100.8, while gold and bitcoin edged higher, signaling a modest revival in risk appetite.

Samsung Electronics posted preliminary second-quarter revenue of 171 trillion won and operating profit of 89.4 trillion won. The result far exceeded the consensus estimate of 84.8 trillion won, marking an earnings surprise and the company's largest quarterly profit on record. Revenue rose 27.7% and operating profit jumped 56% from the prior quarter. Excluding an estimated 20 trillion won bonus provision, operating profit would have topped 110 trillion won, according to some estimates.

Samsung's quarterly operating profit surpassed those of global tech giants including Nvidia, Apple, Microsoft, Amazon, and TSMC, effectively making it the world's most profitable company for the quarter. Even so, shares tumbled 8-9% intraday, extending a 13-session streak of foreign net selling that pushed foreign ownership to its lowest level in 16 years. Brokerages largely attributed the decline to technical profit-taking and rebalancing-driven selling unrelated to the earnings themselves.

SK hynix showed early signs of a strong debut ahead of its U.S. ADR listing, drawing cornerstone investors on the first day of book-building. UK asset manager Baillie Gifford, U.S. hedge fund Coatue, and AI-focused investor Situational Awareness together committed to purchase about $7 billion worth of shares, securing roughly 25% of the offering in advance. Given its undervaluation relative to Micron despite leading the HBM market, expectations are building for a re-rating once it trades in the U.S.

Hanwha Ocean lost out on Canada's submarine program, with Ottawa naming Germany's Thyssenkrupp Marine Systems as preferred bidder. The decision was widely attributed to Germany's broader NATO alliance ties and its ability to reshuffle existing delivery schedules with Norway and other allies as part of an economic and diplomatic support package. Hanwha Ocean shares plunged about 23% to the high-80,000-won range, erasing a year's worth of gains, a drop seen as excessive given the company's recent destroyer order win and role in the U.S. shipbuilding partnership (MASGA). Thyssenkrupp, in contrast, surged more than 10% on the German market.

Despite the broader earnings jitters, cosmetics and consumer names rallied. Clio jumped more than 10%, while Amorepacific and Aromatica also advanced, and Samyang Foods rose 8.9%. Cosmetics exports to the U.S. kept growing even amid concerns over new tariffs on small parcels, and investors are betting that the gap between cosmetics exports and sector stock performance will narrow with a lag. Inbound-consumption plays such as casinos, department stores, convenience stores, and hotels/resorts also gained.

Reports that Nvidia's next-generation server rack has been delayed more than a year to 2028 due to overheating issues rattled the supply chain. Because the racks will continue relying on cable connections between boards rather than the anticipated new interconnect, Credo Technology surged, while forecasts for the optical-connectivity and PCB/substrate markets came under downward pressure.

Rival AMD, seen as a relative beneficiary, jumped nearly 10% intraday and Goldman Sachs raised its price target to $640. Broadcom also rallied on news that its custom-chip supply agreement with Apple has been extended through 2031.

Tesla surged 6-7% on news of an expanded robotaxi rollout in the Miami area, recouping much of the sharp drop that followed last Thursday's delivery report. Morgan Stanley set a $415 price target, citing likely expansion to Phoenix, Orlando, Tampa, Las Vegas and New Orleans by year-end, while JPMorgan maintained its $475 target.

Microsoft announced layoffs of about 4,800 employees, roughly 2% of its workforce, concentrated in the Xbox division, describing the move as organizational efficiency rather than AI-driven displacement; D.A. Davidson reaffirmed its buy rating.

SpaceX was added to the Nasdaq-100 index on the day, and Treasury officials confirmed that co-founder Gwynne Shotwell donated two million shares to fund Trump accounts. The company also merged its AI unit xAI into SpaceX and rebranded as SpaceX xAI.

Research firm SemiAnalysis reported that Nvidia's next-generation AI server rack, Kyber, could face roughly a year-long delay due to PCB substrate defects. The report triggered sharp declines in substrate makers such as Murata and Samsung Electro-Mechanics, with the latter falling more than 10% again. Nvidia denied any delay, and its shares closed slightly higher, suggesting the market's reaction had been overdone.

Large-cap semiconductor names already account for more than half of the Kospi's market capitalization, and that share rises to 64% when the so-called "Sensitive 7" stocks are included. Against this concentrated backdrop, leveraged ETF net assets have surged 82% globally from a year earlier, structurally amplifying index volatility. Leveraged products mechanically buy more as the underlying rises and sell more as it falls, creating a self-reinforcing loop of buying-feeds-buying and selling-feeds-selling.

Under this structure, a decline in one large-cap name can cascade into selling of semiconductor index ETFs, then spread to other large caps and overseas-listed related products. This chain reaction is being cited as the reason sidecar and circuit-breaker halts have been triggered multiple times in a single month — an unusual frequency, given that circuit breakers are typically reserved for once-in-years, crisis-level events.

Analysts stressed that earnings fundamentals and this flow-driven selling are separate issues. While chip earnings themselves are a matter of clear fact, uncertainty over whether hyperscalers will sustain capital spending continues to weigh on investor sentiment. Reports that the U.S. Treasury is internally discussing AI bubble risks compounded the unease, dragging down semiconductor-related stocks worldwide.

Amid ongoing debate over whether the memory chip cycle has peaked, research firm SemiAnalysis pushed back on claims that Meta is slowing data center and computing investment, arguing the pace will actually accelerate and that the recent selloff in related names was overdone. It noted that Meta's added capacity is largely being sourced through third parties such as CoreWeave and Nebius, positioning those firms for monetization gains.

SemiAnalysis also pointed to continued frontier-model training at Meta Superintelligence Labs, the expansion of Meta's ad recommendation system, and its cloud agreement with Anthropic as evidence that capex commitment remains intact. Anthropic's own data-center lease deal with TeraWulf and plan to acquire 1.4 gigawatts of data-center capacity in Australia were read as signs of resilient AI infrastructure demand.

Still, a clear tug-of-war over flows emerged between chips and hyperscalers. Semiconductors, strong early in the session, gave back gains as the day progressed, while security and software names such as Oracle, Palantir, CrowdStrike and Palo Alto Networks continued setting fresh highs.

JPMorgan reiterated a preference for chips over hyperscalers, calling the pullback a buying opportunity, while UBS, Citigroup and Bank of America all raised their DRAM outlooks. Micron and SanDisk, however, failed to recover the prior session's losses, suggesting sentiment has not fully healed.

After the Kospi rallied nearly 100% in the first half, the semiconductor sector that led the surge is now facing headwinds from a mix of domestic and international scenarios pressuring further upside. A "somewhat strong" phase was projected for July, with a separate strategy seen as necessary for the year-end rally starting around October.

For the near-term July-August outlook, analysts flagged several unconfirmed variables, including the Fed's policy stance, upcoming big tech earnings, and hyperscaler capex trends. While volatility is expected to ease, that outcome isn't guaranteed, so maintaining a meaningful cash buffer during high-volatility periods was recommended. Suggestions ranged from an extreme 50% cash allocation down to a minimum of around 30%, enabling flexible buying on dips and selling on rallies.

Within equity holdings, a portfolio splitting exposure evenly between AI/electronics value-chain names like SK hynix and defensive sectors such as financials, shipbuilding, and defense was suggested, reflecting the recent pattern of capital rotating between sectors. Even so, Nvidia ceding some leadership to memory makers doesn't signal the end of the AI upcycle, but rather a natural broadening process as previously concentrated gains diffuse more widely.

A separate analysis of Samsung Electronics argued for interpreting the gap between its earnings and share price differently. The company's cash and short-term financial assets, at 147 trillion won in the first quarter, are projected to reach 200 trillion won reflecting this quarter's results and could exceed 300 trillion won by year-end if current earnings momentum holds. Such a large cash pile could open a new chapter for the company through future investment and shareholder returns. Samsung Electronics and SK hynix have already invested in AI firm Anthropic, which has also discussed cooperation on system-semiconductor AI chips.

President Trump formally launched so-called 'Trump accounts,' dedicated investment accounts for children under 18. More than six million children have already been enrolled, with each receiving $1,000 in seed money and parents able to contribute up to $5,000 annually; funds are locked until age 18, after which the account converts into an individual retirement account.

Wells Fargo estimated the program could draw roughly $20 billion in fresh inflows into US equities, concentrated in the third quarter. Companies including Dell, Micron and Robinhood donated shares to fund the accounts as a promotional move, and the administration appears to be counting on the resulting inflows ahead of November's midterm elections.

Divergent views persisted within the Federal Reserve on rate policy. A former Fed official who once strongly advocated rate cuts recently signaled the opposite, citing shifts in inflation and employment conditions that could argue for a hike, a comment markets read as lowering the odds of a December pause.

The ISM services PMI came in in line with expectations, and price components in both manufacturing and services softened slightly, easing inflation pressure somewhat. This week's 3-, 10- and 30-year Treasury auctions and the first FOMC minutes released under the new Fed chair were flagged as additional catalysts for direction.

The Wall Street Journal warned that Korea's equity market could spiral into a "Squid Game"-like scenario, driven by its concentration in Samsung Electronics and SK hynix, leverage products, and foreign capital outflows. Domestic market participants partly acknowledged the criticism, but also pushed back, arguing that the very act of foreign selling is itself amplifying volatility.

In the Canadian submarine program, Ottawa selected Germany's Thyssenkrupp Marine Systems as preferred bidder over Hanwha Ocean. The announcement came just ahead of the NATO summit, which President Lee Jae-myung, Canadian Prime Minister Mark Carney, and U.S. President Trump are set to attend, with defense-spending discussions expected. While Korea reportedly cleared all technical evaluations, it lost out due to Germany's broader package of economic and security support tied to its NATO alliance ties.

Goldman Sachs projected continued dollar strength — and weakness in the euro and yen — citing delayed Fed rate cuts and structural inflation pressure linked to AI investment. Societe Generale likewise argued a strong dollar is likely to persist since falling oil prices alone won't resolve inflation concerns.

Some at the US Treasury are wary that overheated AI-related asset prices could turn into a bubble, and analysts noted this is also driving investors to buy dollars as a hedge.

Saudi Arabia and the United Arab Emirates continued raising oil output, with Saudi Arabia cutting its August crude price to Asian buyers by $11 a barrel; the UAE also posted its second-highest June production on record, keeping crude under downward pressure near $68 a barrel.

At this week's NATO summit, discussions on the war in Ukraine will be accompanied by the announcement of large new defense-industry contracts. NATO's secretary-general said member states would present concrete plans to hit the 5%-of-GDP defense spending target, and expectations around this lifted US defense stocks such as RTX, helping underpin the Dow's advance. Reports also emerged that the US and China are planning a summit in September, feeding hopes of easing trade tensions.

The overnight U.S. and global market brief above is compiled from 삼프로TV 오전 방송 (https://www.youtube.com/watch?v=A2b9ZPCesDQ).

Lawmakers have begun discussing measures to address the concentration risk and leverage-driven sell-off structure in large-cap semiconductor stocks. One lawmaker called for tighter regulation of leverage products, while another proposed temporarily pausing the National Pension Service's rebalancing.

Market voices called for institutions and pension funds to be positioned to absorb the initial wave of selling before it cascades further. Regulators and the industry were urged to jointly consider measures to ease this structural volatility — not because the market is in crisis, but because the current high-volatility phase needs active management.

The root cause of the Kospi's plunge lies not in earnings or fundamentals but in the concentration of Samsung Electronics and SK hynix and the leverage-and-ETF structure surrounding them. Using a domino analogy: nothing goes wrong if the first domino — large-cap selling — doesn't fall, but once it does, the damage compounds exponentially down the line. The Kospi's roughly 6% drop that day, versus declines of only around 1% for Japan's Nikkei, Taiwan's index, and Hong Kong's Hang Seng, was cited as evidence that Korea's market alone is being shaken disproportionately.

This amplification stems from leveraged ETFs mechanically buying more as underlying assets rise and selling more as they fall. With Samsung Electronics, SK hynix, and the so-called "Sensitive 7" together accounting for 64% of Kospi market cap, a wobble in SK hynix can cascade into selling of semiconductor index ETFs, then other large caps, then overseas-listed related products. The result is the unusual pattern of sidecar and circuit-breaker halts being triggered multiple times a month.

Based on this, the argument was made that institutions and pension funds — the buyers capable of catching the first falling domino — need to adopt a different stance than they currently do. Regulators and industry were called on to jointly design structural safeguards against the domino's spread, and the political proposals to regulate leverage products or temporarily pause National Pension Service rebalancing were framed in this same context. While reiterating that earnings and the outlook themselves remain sound, the core argument is that institutional buffers are needed to cushion flow-driven shocks.