Panic Fades as Samsung Electronics Earnings Spark Rebound Signal, but Regulators Remain Behind the Curve

KOSPI, after correcting from the 9,000 level to 7,200 and then breaking its 120-day moving average at 6,700, plunged further to as low as 5,500 intraday. Panelists described the situation as comparable to an emergency on the scale of war or an earthquake.

The drop in Samsung Electronics' PBR to around 3x emerged as the central point of debate. Panelists noted that the world's most profitable company trading at 3x PBR without reacting to any positive news was evidence the market was not functioning normally. Simultaneous pressure from margin calls and short selling was described as leaving the market almost unable to absorb good news.

Korea's underperformance stood out against other Asian markets. Japan's Nikkei fell only around 1%, Hong Kong's Hang Seng gained about 1.6%, and Shanghai's Composite slipped a mild 0.1%, while KOSPI and KOSDAQ alone posted sharp declines. KOSDAQ, which fell from 1,000 points at inception to the 600 level, was said to have effectively stopped functioning as margin calls and short selling compounded.

Regulators were criticized as far too slow to respond. The ruling party reportedly considered cutting the leverage cap from 2x to 1.5x, then denied it two days later, sending mixed signals, while the only concrete step was moving up the leverage ETF limit increase (from 100 billion won to 300 billion won), originally planned for early August, to this week — with no substantive emergency measures otherwise. Critics argued that with many investors having already lost nearly half their assets, regulators were still treating the situation as an ordinary top-versus-bottom debate.

KOSPI oscillated between gains and losses around the 5,665 level, staying roughly flat, while KOSDAQ fell nearly 2% to 649. The won strengthened to 1,144 per dollar after the dollar index fell below 100 following the FOMC decision. Foreigners were net buyers of both cash equities on the exchange and KOSPI futures simultaneously, though their buying had limited power to lift the index.

Key news items covered included the U.S. Federal Reserve holding rates steady for a fifth consecutive meeting with three dissents, divergent earnings from Microsoft and Meta, reports of Apple lobbying to adopt Chinese memory chips, Samsung Electronics' finalized second-quarter earnings, a joint inter-agency meeting on leveraging ETF regulation, and a surge in shipbuilding stocks led by HD Hyundai Heavy Industries. Later in the broadcast, rising Treasury yields coincided with KOSPI giving back its intraday gains in a volatile session.

The next FOMC meeting is scheduled for September 16 (local time), with effects expected to be reflected in Korea around September 17 local time. With major indicators including CPI and employment data due in the interim, this period was flagged as a watershed for gauging future market direction.

Microsoft reported revenue above $90 billion and adjusted EPS of $4.74, both beating estimates. Revenue grew 17% year-over-year, cloud segment revenue rose 43%, and next-quarter capex guidance was set at $50 billion. Remaining performance obligations rose 84% year-over-year, strengthening the future revenue base — a positive that sent shares up more than 7% in after-hours trading.

Meta reported revenue of $60.8 billion, above estimates, but EPS of $6.18 missed expectations. The company raised the low end of its 2026 capex guidance from $130 billion to $150 billion, but shares fell more than 7% as operating cash flow of $31.8 billion and free cash flow shrinking to around $700 million drew attention. Remaining litigation risk tied to numerous lawsuits over teen safety was also cited as a burden.

The divergence between the two companies was attributed to differences in how AI investment translates into returns. Microsoft sells AI directly as a cloud service, generating revenue simultaneously with investment, while Meta's AI use indirectly boosts ad efficiency, creating a lag before returns materialize. Panelists noted that despite Meta's repeated setbacks such as Reality Labs and smart glasses, its more than 85% share of the global smart glasses market suggests potential for long-term re-rating.

Amid continued reports that Apple is lobbying the U.S. administration to allow adoption of Chinese memory, including from ChangXin Memory Technologies (CXMT), citing price stability, a Wall Street Journal report revealed that CXMT had actually quoted a higher price than Samsung Electronics or SK hynix. U.S. senators have already warned Apple against using Chinese memory.

Panelists characterized this as a classic case where the supplier raised its price in negotiations initiated by the more eager buyer. They assessed that Apple's lobbying is unlikely to succeed in any case, since CXMT and Yangtze Memory Technologies are already subject to U.S. security restrictions. They also noted that U.S. political incentives clearly favor Micron, whose jobs are largely domestic, while Apple — which depends on China for 90% of iPhone production — has weaker political standing.

Panelists interpreted the episode as the first crack in the market's excessive optimism toward CXMT. They noted that stocks which have surged sharply in the short term tend to see negative news weigh more heavily afterward, suggesting further negative headlines related to CXMT could follow.

Samsung Electronics reported second-quarter revenue of 171 trillion won, operating profit of 89.5 trillion won, and an operating margin of 52%. Within the Device Solutions (DS) division alone, revenue was 127.5 trillion won and operating profit was 89.2 trillion won, an operating margin of 70%. On memory, the company said broad-based demand from AI infrastructure investment and agentic AI would keep the supply-demand imbalance in place for the time being.

HBM4 revenue more than tripled quarter-on-quarter, and HBM's share of total memory revenue is expected to reach around 60% in the second half. Panelists noted that as HBM production share rises, capacity available for commodity DRAM shrinks, which could push commodity memory prices further up in the second half. DDR4 spot prices have already risen 17.6% month-on-month and fixed contract prices are up more than 5%, with TrendForce data showing price increases across the entire DDR3-to-DDR5 lineup.

On long-term agreements (LTAs), the company said it has completed contracts with five major global data centers and is in final-stage negotiations with five additional large customers. It is allocating only 60-70% of total production to long-term contracts to preserve supply flexibility, with five-year contract structures becoming standard. For foundry, no specific timeline for turning profitable was given, but the company said leading-edge process utilization is at its maximum and used language suggesting a near-term return to profitability is possible. A roughly 300 trillion won contract with Broadcom through 2030 and Tesla's preparations for 2-nanometer mass production were also cited as factors supporting a foundry rebound.

On shareholder returns, the company gave only a general answer, saying it would share good news soon, without specifying an amount or timing. Industry observers speculated that Samsung Electronics and SK hynix are each waiting to see the other move before announcing returns, and that with SK hynix's ADR-listing-related U.S. securities law quiet period ending after 1:00 p.m. Korea time on August 4, both companies' shareholder return announcements could cluster around September.

Despite broad market weakness, shipbuilding stocks rallied uniformly. HD Hyundai Heavy Industries rose more than 10%, Daehan Shipbuilding over 8%, and Hanwha Ocean over 7%. HD Hyundai Heavy Industries posted consolidated second-quarter operating profit of 1.64 trillion won, up 42% year-on-year and 15% above market consensus.

The earnings release also included concrete forward-looking details the market had been waiting for: review of engine production capacity for AI data center vessels, achieving 96% of its annual order target within half a year, and consideration of small modular reactors (SMRs) for offshore data centers. The shipbuilding segment's operating margin hit a record 18.8%.

Panelists interpreted the earnings release as a signal that the market still responds immediately to good results, taking it as evidence the market's pulse is still beating even amid the sharp selloff. They suggested continued attention to individual industries such as cosmetics and shipbuilding, where a second-half rebound is expected.

The U.S. Federal Reserve held its policy rate steady for a fifth consecutive meeting. However, three committee members dissented in favor of a hike, marking the largest number of dissents since 2016 — a decade high. This was interpreted as reflecting stronger-than-expected internal concern over inflation; following the announcement, U.S. stocks closed lower and the 10-year Treasury yield rose above 4.6%.

Fed officials including Kevin Warsh reportedly signaled a pullback from pre-emptive forward guidance, suggesting the market would begin reacting directly to actual data and changing conditions. Panelists interpreted this as an attempt to achieve a de facto tightening effect by tolerating rising market rates without directly raising the policy rate. Indeed, U.S. Treasury yields rose to around 5.2% for the 30-year, 4.6% for the 10-year, and 4.28% for the 2-year, with longer maturities seeing larger increases.

Next week's U.S. Treasury quarterly refunding announcement was also flagged as a factor pressuring long-term yields. Rising war-related costs and tariff refund burdens were cited as increasing the Treasury's funding needs, adding to upward pressure on long-term rates. Panelists argued that the Fed's lack of clear direction is the root cause of market uncertainty, expressing hope that around the September FOMC meeting, clarity on direction itself — rather than simply hike-or-cut — would emerge.

A joint emergency market review meeting involving the Ministry of Economy and Finance, the Financial Services Commission, the Financial Supervisory Service, and the presidential chief economic secretary produced measures targeting leveraged ETFs. These include capping individual investment at 20% of total investable assets, raising costs for excessive trading, introducing simulated-trading education, and establishing a legal basis for a Hong Kong-style variable leverage ratio system. New listings of single-stock leveraged products were suspended and related advertising was banned.

The minimum deposit requirement rises from 30 million won to 50 million won effective the next day, and the trading quantity limit expands from single digits to 20 digits starting in November. Advanced education hours will also increase from 2 to 3 hours in August. However, trading volume in related leverage/inverse ETFs paradoxically increased after the announcement. Trading value in a single SK hynix inverse ETF reached 3.7 trillion won, exceeding KOSDAQ's entire trading value of 3.1 trillion won.

Panelists questioned the effectiveness of the measures, arguing that policy design should start from a level strong enough to actually work on the market, then narrow the discussion — rather than starting from what seems feasible. Rather than nudging the deposit requirement from 30 million to 50 million won, they argued, an aggressive cap should be proposed first as an opening position for negotiation. A structural limitation was also noted: changing ETF terms requires unitholder meeting approval (25% initially, 12.5% on re-convening), making rapid ratio adjustments difficult. By contrast, measures such as establishing a legal basis for direct exchange intervention or strengthening market makers' quote-dispersion obligations were seen as quicker to implement and could be prioritized.

Closing the broadcast, Kwangsoo revisited a phrase he has often used during past market crashes: what falls has wings. The point being that having wings is precisely what causes the fall, but if those wings remain alive, a rebound is still possible.

He interpreted Samsung Electronics' earnings release that day as evidence those wings remain intact. Even amid extreme volatility and market panic, confirming that individual companies' fundamentals remain sound was itself meaningful.

He urged investors not to surrender all their emotions to the market's swings, but to stay level-headed and prepare for the next phase. He previewed that the next broadcast would cover concrete strategies investors can take during the current sharp downturn.