KOSPI Plunges Over 4% While KOSDAQ Triggers Buy-Side Sidecar as Yen-Dollar Coordination Rattles Markets

On the first trading day of August, the KOSPI fell more than 4%, dropping to the low 6,300s, as it retraced part of the prior session's 17% surge. In contrast, the KOSDAQ extended its rally following the prior session's 11% surge, climbing further into the high-3% range, and a buy-side sidecar was triggered intraday, pushing the index up near 747 points. Foreign investors net sold about 1.7 trillion won in KOSPI cash equities and about 160 billion won in KOSDAQ, and also sold roughly 1.1 trillion won in the futures market, leading the index decline.

As the session progressed, the KOSPI's decline widened to around 4.7%, closing near 6,284 points, with foreign investors net selling about 2 trillion won and institutions net selling about 1.3 trillion won in the KOSPI. Samsung Electronics and SK hynix plunged 8% and 7%, respectively, while Samsung Electro-Mechanics held onto a roughly 2% gain on the back of solid earnings. On the KOSDAQ, Alteogen, Rainbow Robotics, and Jusung Engineering rose 4-7%, underpinning the index's strength.

The hosts said they would not overreact to the sharp index decline and urged staying resilient through the highly volatile market. They also noted that trading value in single-stock leveraged/inverse ETFs had actually declined since margin requirements for such products were tightened — after the rule requiring individual investors to hold cash deposits of between 10 million and 30 million won took effect, trading value in single-stock leveraged products such as KODEX SK hynix declined compared to the previous day.

On Monday night this week, Palantir's earnings are due in the US, drawing attention as an indicator of whether the company is generating real profit from AI. On Tuesday, Korea's July Consumer Price Index (CPI) and the Monetary Policy Committee minutes will be released, while in the US the June Job Openings and Labor Turnover Survey (JOLTS) and earnings from SpaceX and AMD are scheduled. This will be SpaceX's first earnings report, with a lock-up expiration also scheduled to follow.

Wednesday brings SK Telecom's earnings along with results from US memory makers SanDisk and Western Digital. Thursday features earnings from LNF and Wonik IPS, among others, and Friday evening in the US will see the release of the July employment report. Domestically, earnings from Naver, Samsung Electro-Mechanics, and Pharma Research are also due throughout the week.

The panelists named the US employment data as the most important variable this week. They explained that if the data confirms a slowdown in hiring, it could be interpreted as reducing the need for the Fed to raise rates further, which would be favorable for the market. Just as the market reacted when consumer sentiment and CPI came in lower than expected, this week's employment data was also cited as a key variable for gauging the direction of interest rates.

Japanese NAND flash specialist Kioxia reported net income of about 842.1 billion yen for the first quarter of fiscal year 2027, below the market consensus of about 970 billion yen, and its guidance for next-quarter revenue and earnings per share also fell short of expectations. Nevertheless, its shares rose about 6% in Japan's after-hours market and climbed as much as 10% intraday at one point, showing the strongest performance among Asian memory stocks.

The driving force behind the rally was a strong shareholder return policy announced on the earnings call. Kioxia said it may secure 50% of its 2028 production capacity through long-term supply contracts and stated it opposes excessive capex expansion aimed at growing market share, while also announcing a 1-for-10 stock split effective October 1 to improve shareholder accessibility. It additionally unveiled a share buyback plan of about 840 billion yen — roughly matching this quarter's net income.

Center head Roh Geun-chang and other panelists noted that Japanese companies have cultivated a shareholder-friendly culture over roughly a decade of stock market normalization reforms since 2013. They explained that even when earnings fall short of expectations, Japanese companies' response has been to continue rolling out unexpected return measures to preserve market trust. Nomura noted that Kioxia's stated target of a 50% total shareholder return ratio is a first in the memory industry, and projected that Korean memory makers could also move toward the largest share buybacks in their history.

The panelists assessed that shareholder returns among domestic semiconductor companies remain insufficient, noting that if Samsung Electronics or SK hynix applied a return policy at Kioxia's level, buybacks in the trillions of won would be required. They went on to say that dividing profit among investment, labor, and shareholders is an obligation of listed companies, and that building this kind of trust is both the starting point and the end goal of resolving the Korean stock market's undervaluation.

On the KOSDAQ that day, robotics-related stocks surged. Wonik Robotics and TSR Robotics hit their upper limit, and Korea Robotics and others also posted double-digit gains. However, analysis suggested this was less driven by clear momentum than by belated catch-up buying in stocks that had previously seen large declines. China's Unitree IPO and Hyundai Motor Group's 2026 CEO Investor Day were cited as the real potential catalysts going forward.

July exports, announced on August 1, rose 6.2% year-on-year to $98.8 billion. Besides semiconductors, exports of ships, cosmetics, and bio-health products were also confirmed to have maintained solid momentum. Although Samsung Electro-Mechanics posted both solid earnings and guidance, its share price had already risen significantly beforehand; still, it held onto a roughly 2% gain that day even as Samsung Electronics and SK hynix plunged, raising the prospect that earnings-driven stocks could stand out during August's earnings season.

Park Si-dong assessed that Samsung Electro-Mechanics could shake off overvaluation concerns given that its business structure is shifting from a short-term boom tied to semiconductor substrates toward a more downside-resilient structure based on long-term agreements (LTAs). He also noted that domestic companies including Samsung Electronics are accelerating construction of new overseas plants, which he interpreted as a sign of a swift market response.

July semiconductor exports fell from the previous month, and Park Si-dong focused on the trend of rising prices alongside declining volume. He said the decline in export volume signals continued supply shortages, and added a hypothesis that alongside a drop in inventory, general DRAM production may be relatively decreasing as Samsung Electronics expands its HBM production share.

Japan's Ministry of Finance announced that it had officially confirmed currency coordination with the US Treasury to defend the yen's value — the first such coordination in 28 years. The ministry said the move was in response to excessive volatility and disorderly movements in the yen seen in recent months, and stated that Japan would going forward utilize the Federal Reserve's repurchase agreement (repo) facility, sending the yen-dollar rate down to the 156 level. This was interpreted as Japan raising dollars by pledging its holdings of US Treasuries as collateral to the Fed and using them to buy yen, rather than directly selling the Treasuries into the market — effectively achieving the same dollar-supply effect without dumping bonds on the market.

Park Si-dong explained that this measure is a compromise designed to help Japan defend its currency while minimizing the shock to the US Treasury market. With Japan unable to raise its policy rate due to the burden on its domestic economy, directly selling Treasuries would push up global bond yields and burden the US as well — this alignment of interests made the unusual coordination possible. He noted that US Treasury Secretary Bessent separately voiced support for the Takaichi government's stimulus measures, which he interpreted as effectively signaling to Japan to refrain from raising rates.

Some in the market criticized the measure as merely a stopgap that pledges Treasuries as collateral rather than selling them, arguing it has actually increased uncertainty around yen volatility. Concerns were also raised that a shift to yen strength could trigger a yen carry trade unwind, drawing global capital back to Japan and increasing foreign selling pressure on risk assets including Korean equities — one factor cited for the domestic market's decline.

However, Park Si-dong pushed back against this interpretation as excessive. He said the fundamental driver of the yen carry trade is the interest rate differential, not currency fluctuation itself, and the recent range of movement is not large compared to when the rate previously broke past 164 yen — so while some position unwinding may occur, it is unlikely to trigger a large-scale unwind of global capital as a whole. He pointed out that if a yen carry trade unwind were actually occurring, it would normally be expected to hit risk asset markets worldwide, not just Korea, and that framing it as a risk specific to the Korean market is a factor that excessively depresses investor sentiment.

Roh Geun-chang, Head of Research Center at Hyundai Motor Securities, appeared on Noon Salon to discuss the background and outlook for the recent sharp decline in the semiconductor sector. He said that while similar sharp swings occurred in 2017-18, this is the first time a sell-off has pushed valuations down to a price-to-book ratio (PBR) of 1x despite strong earnings, and that July would be a period long remembered by capital market participants. He assessed that from the standpoint of suppliers (Samsung Electronics, SK hynix, etc.), the stability of the revenue structure has improved significantly compared to the past due to long-term supply agreements (LTAs), but that market concerns are mainly focused on the sustained investment capacity of demand-side hyperscalers.

He acknowledged that hyperscalers' data center capex this year is expected to reach about $1 trillion, while combined cloud revenue and AI service revenue stand at only about $700 billion, which could appear as excessive investment relative to revenue. However, he noted that many of Amazon and Google's cloud contracts were signed at low prices back in 2024, so as renewal periods arrive starting in 2027, contract pricing is likely to normalize considerably. He also explained that Amazon's proprietary chip revenue (Trainium, Graviton) has already reached $25 billion and Google's TPU revenue has reached $20 billion, improving their cost structures by reducing reliance on Nvidia.

He emphasized that if this trend continues, hyperscalers' free cash flow could turn positive around 2027-28, which would substantially ease concerns about a pullback in data center investment. Citing Anthropic's case of already achieving profitability with a 5% operating margin, he assessed that the AI industry, despite still being in its early stages, is entering a monetization phase faster than expected. He interpreted last Friday's sharp sell-off as driven by hedge fund short covering and leverage unwinding.

Center head Roh Geun-chang also shared his views on the threat narrative surrounding China's ChangXin Memory Technologies (CXMT) and its listing. Citing the fact that ASML's revenue share from China plunged from 41% in 2024 to 14% this year, with Korea (43%) and Taiwan (30%) taking its place, he assessed that as long as US restrictions on advanced equipment exports remain in place, it will not be easy for CXMT to realize its planned capacity expansion as scheduled. He explained that CXMT remains structurally constrained by continued dependence on Lam Research, Applied Materials, and ASML for key process equipment such as etching, deposition, and lithography.

Regarding moves by Apple to adopt CXMT's NAND for iPhones, he cited the fact that the US House and Senate have demanded Apple explain its plans by August 21, and assessed that the likelihood of this actually happening is low. He also noted that if CXMT's supply chain is found to be involved in Huawei's accelerator production, there is a risk that sanctions could be expanded to end-set manufacturers such as Apple, rather than just semiconductor companies. However, he concluded that since data center demand accounts for more than 60% of total memory demand and more than half of new data centers are expected to be concentrated in the US through 2030, the threat from Chinese memory is limited to consumer products and China's domestic market, and is not currently a variable that should be reflected in stock prices.

Center head Roh Geun-chang said the market debate over whether to view the semiconductor sector as a growth stock or a cyclical stock, and whether to value it by PER or PBR, is still unresolved. Estimating next year's book value per share (BPS) at about 1 million won for SK hynix and about 180,000 won for Samsung Electronics, he expressed doubt about whether applying a PBR of 10x — TSMC's level — is justified, but assessed that the recent sell-off has been excessive even on a PBR basis. He said that on the premise that revenue and profit scale will continue to grow over the next three years, he is currently applying a conservative valuation around the average of the valuation band.

He predicted that, unlike past semiconductor chicken games, there is currently no weak competitor in the market that could be driven out, making a repeat of price competition unlikely; instead, competition will continue through product differentiation such as low power consumption and high performance. For Samsung Electronics, he noted that since its shareholder return policy — typically announced in January — is set to conclude its three-year plan this year, a new return policy is likely to be unveiled early next year, and for SK hynix, he expected additional shareholder return messaging once the ADR listing issue is resolved.

For investors, citing the example of an acquaintance who recently bought semiconductor stocks for the first time, he advised that if the purchase was made with cash rather than credit, investors should trust the fundamentals and wait. He said that while share prices were vulnerable to noise after having risen a great deal, the influence of noise should actually diminish now after such a large decline, and urged investors to focus on earnings and the broader trend. He closed the interview by emphasizing that hardware competition between hyperscalers and semiconductor companies has historically always worked out as an opportunity for memory makers.

Lee Kwang-soo said that the premise behind Warren Buffett's pursuit of compounding is ultimately survival in the market, and the core principle for survival is not losing large amounts of money. He explained that Buffett himself has incurred losses before, but was able to survive in the market because he adhered to the principle of minimizing losses as much as possible. He emphasized that investors should place greater weight on the principle of losing less money than on the goal of making a lot of money.

From this perspective, he pointed out that the biggest problem in the current Korean stock market is volatility. He noted that the range of fluctuation in the KOSPI index, based on intraday lows, highs, and closing prices, has continued to widen over the past year. In the past, the fluctuation range was around 2%, making it somewhat possible to predict movements after the market opened, but recently the market has become one where predictions can be wildly off — starting the day up 1% but surging as much as 8-9% intraday, or conversely plunging as much as 7-8%.

His argument is that in a highly volatile market, the likelihood of losing money increases correspondingly, so investors should take as conservative an approach as possible. He divided investors into three categories — those holding both stocks and cash, those holding only stocks, and those holding only cash — and advised that each group should establish a plan in advance to reduce losses. He said investors holding only stocks should have a plan to reduce their position if the stock price falls beyond a certain level, while investors holding only cash should adopt a strategy of buying not when volatility is increasing but when the fluctuation range is narrowing.

He noted the difference between investors who aim to make a lot of money, who view volatility as an opportunity and actively buy during sharp declines, and investors who aim to lose less money, who remain cautious even during rallies, keeping in mind the possibility of further declines. He reiterated that whether one perceives volatility as a risk or an opportunity is the key factor that determines investment performance, and advised not to leave the market but to stay in it while waiting for volatility to subside.