KOSDAQ Triggers Buy-Side Sidecar for Third Straight Session as KOSPI Diverges, Sector Rotation Signs Emerge…Lee Jae-myung Administration Unveils Real Estate Tax Overhaul

KOSPI fluctuated between a 0.5% and roughly 1% decline, moving around the 6,225-point level, while KOSDAQ rallied more than 4.9% to above 774 points, triggering a buy-side sidecar for the third consecutive session. Oil prices and Treasury yields rose and the yen weakened against the dollar, while the dollar index fell, leaving the won-dollar rate relatively stable around 1,428 won.

Host Lee Kwangsoo questioned why KOSPI was falling the day after U.S. hyperscaler stocks surged. He interpreted it as a short-term supply-demand issue: KOSDAQ has already fallen so far that few sellers remain, so selling pressure has eased and bargain-hunting has emerged, whereas KOSPI still faces selling pressure even without any specific bad news.

A guest panelist noted that over the past year-plus, semiconductor and electric power-related stocks had clearly led the market as dominant themes, but the market is now in a vacuum with no clear leadership. He suggested a hypothesis: as KOSPI, after its sharp drop, keeps hitting resistance from overhang supply and fails to stage a V-shaped rebound, KOSDAQ — where sellers have largely exhausted themselves — may be seeing a supply-demand vacuum emerge first, with foreign and institutional investors driving prices up as they buy. However, he cautioned it is still too early to be confident this marks a trend reversal.

In KOSDAQ, robot-related stocks rallied first in recent days, followed by biotech and cosmetics stocks on this day. It was also noted that, apart from cosmetics, the rotation has largely centered on growth stocks rather than earnings-driven names. The view was that a rally without a clear new catalyst should be seen as a process of improving supply-demand conditions following a bottom confirmation.

In the late-session market wrap, KOSPI was on track to close down about 1%, while KOSDAQ's gain had widened to as much as 5%. Foreign investors sold roughly 70 billion won in KOSPI cash and futures combined and around 200 billion won in KOSDAQ, but in both markets the number of advancing stocks far exceeded decliners. Samsung Electronics and SK Hynix fell about 3%, but defense and construction stocks held up, limiting the index's decline.

On why Samsung Electronics and SK Hynix shares have struggled to rebound, the panelist pointed to trends in margin loan balances. Excluding Samsung Electronics and SK Hynix, margin loan balances for other stocks have fallen about 35% from their peak to around 28.9 trillion won, whereas margin loan balances for the two leading chipmakers have declined only about 17% from their peak, indicating lingering overhang.

On reports of rising short selling in Samsung Electronics, the panelist offered a cautious view: it could signal large funds betting on downside, but conversely, a short-covering event could actually amplify upward momentum, so it warrants closer observation. Analysts' earlier comments were reiterated — that without a continued stream of upward revisions to semiconductor earnings estimates, the stock price could remain sluggish.

This week's earnings calendar was also reviewed. On Tuesday, August 4, Ecopro, Samsung Securities, Hanwha, Kakao Pay, Ecopro Materials, Ecopro HN, and GS Retail are set to report, while in the U.S., Palantir, Tesla, and Coca-Cola have already reported. SK Telecom and APR are scheduled for Wednesday, and Naver, Sanil Electric, and Lotte Shopping for Friday — with earnings concentrated among relatively smaller-cap consumer names and KOSDAQ-adjacent stocks within KOSPI, so investors were advised to check the earnings schedules of their holdings in advance.

In U.S. trading, hyperscaler stocks rallied broadly on analysis that major tech companies' — especially cloud providers' — AI capex is translating into actual revenue and profit. Amazon surpassed a $3 trillion market cap, joining the so-called $3 trillion club, while Microsoft rose more than 4.9%, Meta as much as 6%, Alphabet more than 4.8%, and Oracle around 9.2%, with major hyperscalers rising in tandem. Apple, seen as lagging in AI investment, relatively slipped in market-cap ranking.

The panelist assessed that this earnings season has effectively put to rest the doubts about the AI ecosystem, hyperscalers, and semiconductors that persisted throughout July. In particular, even Oracle — which had relatively underperformed among big tech — rose more than 9%, which was interpreted as evidence that a consensus has formed that there is little for the market to worry about across the AI value chain. However, it was also noted that the puzzling weakness of Korean semiconductor stocks despite this tailwind from U.S. big tech is difficult to explain using the conventional value-chain logic.

Second, Palantir's earnings were discussed. The AI data analytics company beat market expectations on both this quarter's results and next quarter's and full-year guidance, and its shares surged as much as 14% in after-hours trading following the report. Notably, the rising share of commercial revenue within a sales mix once dominated by U.S. government and defense was viewed positively, and the company was noted as collaborating with South Korea's Samyang Foods, among others, applying AI to areas such as factory efficiency. Palantir's so-called 'Rule of 40' metric — combining growth rate and profitability — reached 155%, which was seen as clear proof of its performance as a software company.

Japan's NAND flash specialist Kioxia was cited as a stock whose share price and earnings have surged recently amid rising AI chip-related demand. NAND flash is a long-term memory storage device that retains data even when powered off, and demand is being highlighted as AI expands into the inference domain. However, Kioxia's quarterly results merely met guidance rather than delivering an earnings surprise, and were reportedly closer to a slight earnings miss.

Nonetheless, Kioxia shares surged nearly 10% intraday at one point, which was attributed to two shareholder-friendly measures announced alongside earnings: a share buyback and a stock split. Notably, the buyback size was about 840 billion yen, roughly equivalent to the quarter's net profit. The panelist likened this to SK Hynix buying back roughly 60 trillion won worth of its own shares — an amount equal to its quarterly net profit — calling it a dramatic move if applied to a Korean chipmaker.

This shareholder-return culture was explained as the result of more than a decade of Japanese stock market reform and normalization measures dating back to 2013. A culture has taken root in which companies proactively devise unexpected shareholder-return measures to secure market confidence when share prices fall sharply or volatility rises. The panelist noted that allocating corporate earnings across labor, investment, and shareholders is a listed company's obligation, and pointed to building such a shareholder-return culture as a task Korean companies should also pursue going forward.

Also discussed was the contrasting case of Samsung Electronics and SK Hynix, whose share prices fell despite posting astronomical earnings the same day. The panelist assessed that the Korean market has not yet fully recovered in terms of supply-demand and investor sentiment, and that a Korea-specific suppressive factor remains, given that a substantial share of the top-traded stocks in the recent downturn have been concentrated in leveraged products.

Despite the KOSPI index's decline, the number of advancing stocks exceeded 700, reported as sector rotation amid large-cap profit-taking and declining trading value in leveraged ETFs. Defense stocks rose strongly, with Hanwha Aerospace up more than 8% and Korea Aerospace Industries up 10%, while construction stocks also rose together, led by Daewoo Engineering & Construction on strong earnings and guidance. AI software-related names such as SK Telecom and LG CNS also stood out with notable gains within KOSPI.

The panelist viewed this trend positively, interpreting it as a sign of a normal market dynamic where demand rises as prices fall. However, he cautioned against letting the gap widen excessively or volatility increase, advising that individual investors — who had been overly concentrated in a handful of stocks such as semiconductors — should use this downturn as an opportunity to diversify their portfolio weightings.

Pharmaceutical and biotech stocks also surged. Alteogen rose about 7%, ABL Bio about 13%, and LegoChem Biosciences about 15%, with the latter's rally compounded by a disclosure of its chairman's on-market share purchases. However, the panelist stressed that, contrary to recent reports framing a broad biotech-sector rally over the past two days, stock selection is actually needed, as stocks with rebounds justified by prior oversold conditions are mixed together with others lacking sufficient grounds for a rebound. With major U.S. pharmaceutical companies including Merck and Pfizer set to report earnings starting that evening, the potential impact on their Korean partner companies was flagged as worth watching.

Cosmetics stocks also rallied. Alongside news that July cosmetics exports hit a record high, shares of d'Alba Global, Cosmecca Korea, and Silicon2 rose between 7% and nearly 10%. The panelist noted that OEM/ODM makers benefit either way, naming Korea Kolmar, Kolmar Holdings, Cosmax, Cosmecca Korea, Korea Cosmetic Manufacturing, and C&C International, while on the brand side he highlighted Amorepacific, which has already posted strong earnings, along with APR and d'Alba Global, both of which have earnings reports still ahead.

Lee Kwangsoo assessed the real estate tax overhaul unveiled the previous day — the first under the Lee Jae-myung administration since taking office — as not intended to artificially push down home prices, contrary to some criticism that it contradicts the campaign pledge not to use taxes to control home prices. He explained that the core of the overhaul is a major shift in direction toward market normalization, which can be summarized in three main points.

The first is a shift from 'ownership' to 'residence.' Previously, single-home owners could receive a capital gains tax reduction of up to 80% simply by meeting a holding-period requirement, but now they must actually reside in the home to receive the reduction. Likewise, for the comprehensive real estate tax basic deduction, a flat 1.2 billion won deduction previously applied without distinguishing between resident and non-resident owners, but going forward, a higher deduction rate will be applied to owner-occupied homes to incentivize actual residence.

The second is a shift from a 'regressive' to a 'progressive' structure. Previously, the more one earned from real estate, the relatively lower the tax burden became — an unfair structure — but this overhaul clearly reflects a progressive structure in the comprehensive real estate tax, similar to earned income tax, under which tax rates rise sharply for higher-priced homes and larger gains.

The third is the introduction of new systems not previously in place. Most notably, a cap has been placed for the first time on the capital gains tax reduction for single-home owners. For example, for a Gangnam-area home with a sale price of 7.5 billion won and an acquisition price of 2.5 billion won — a capital gain of 5 billion won — the calculated tax was previously only 300 million won, but once the system is fully applied by 2029, the tax would rise to about 1.3 billion won. For an elderly owner of a home worth around 4.5 billion won, the comprehensive real estate tax is estimated to rise from under 10 million won annually in 2026 to roughly 17-18 million won two years later, an increase of about 80%.

Lee Kwangsoo acknowledged various counterarguments — concerns about the burden being passed on to tenants, calls for supply measures to come first, and criticism that the comprehensive real estate tax has never succeeded — but said he gives this tax overhaul high marks, noting that establishing the principle of an owner-occupant-centered, progressive tax structure is itself a meaningful first step. He added, however, that tax policy alone will not complete market normalization, and that it must be accompanied by other policy measures such as housing supply and lending regulations.