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

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.