KOSDAQ Buy-Side Sidecar Triggers 6% Surge Despite US July Jobs Shock, as Semiconductor Re-Entry Case Builds

The KOSPI closed at 6,304 points, up more than 0.7% from the previous session and holding the 6,300 line, while the KOSDAQ surged past 848 points, up more than 6%, triggering an intraday buy-side sidecar. Foreign investors net sold roughly KRW 70 billion in the KOSPI market, extending their selling streak to a third consecutive session, but turned net buyers in the KOSDAQ for the first time in six sessions, adding to the upward momentum. The won fell to 1,415 per dollar, the dollar index edged up to 99.7, and the yen weakened past 158 per dollar.

Hosts noted that, compared with the extreme volatility of the past two months, the day's session reflected a normal pattern with the KOSPI's swings actually narrowing considerably. Still, the KOSDAQ's more than 6% surge was assessed as a reactive rebound from its previously outsized declines.

The 10-year Treasury yield fell during the session before paring losses as oil prices rose on Middle East geopolitical concerns, with the US 10-year holding roughly flat around 4.65%. The 2-year yield edged down to around 4.208%.

After today's market close, Taiwan's TSMC will report July sales, China's Unitree will open its IPO subscription, and President Lee Jae-myung is set to chair the second review meeting on mega-projects starting at 2 p.m. On Tuesday the 11th, preliminary export data for August 1-10 will be released.

On Wednesday, the US will release its July consumer price index (CPI), and AI-related names including Nebius and CoreWeave are due to report earnings, making the day a key gauge of AI sentiment. Thursday is a domestic options expiration day and will also bring the US July producer price index (PPI) along with earnings from semiconductor equipment maker Applied Materials. News also emerged that Bill Gates will visit Korea on Friday to discuss cooperation on small modular reactor (SMR) projects.

With Nvidia's earnings on August 26, the Bank of Korea's Monetary Policy Board meeting on the 27th, and the Fed chair's Jackson Hole keynote on the 28th falling on three consecutive days, the market views this stretch as a key inflection point for gauging future direction. Commentators noted that if US CPI comes in stable or below expectations, it could fuel expectations of falling Treasury yields alongside inflows into emerging-market assets.

KB Securities center head Kim Do-won maintained a target price of KRW 600,000 and a buy rating on Samsung Electronics, issuing a report estimating that the company's upcoming shareholder return policy could see annual returns ranging from a minimum of KRW 100 trillion to as much as KRW 200 trillion. That would represent more than a tenfold increase from the existing roughly KRW 9 trillion level, with the analysis suggesting the dividend yield could reach approximately 7% at the current share price. Hosts noted that an analyst laying out such specific figures and using language like a 'conviction buy zone' was an unusually strong expression of confidence.

SK hynix announced last Friday via regulatory filing a second-quarter dividend of KRW 375 per share and stated it would finalize and announce additional shareholder value enhancement measures during the third quarter. This moved up the previously mentioned year-end timeline to the third quarter, interpreted as a response to sustained market demand. Since the third quarter spans July through September, there was speculation the announcement could come as early as September.

Hosts noted that Samsung Electronics and SK hynix could both announce large-scale shareholder returns within the third quarter, which would signal confidence in earnings stability and could serve as a catalyst for resolving the so-called 'Korea discount.' Conversely, concern was also raised that failing to follow through on these market expectations would trigger significant disappointment.

Alteogen surged 13-14%, leading the KOSDAQ's advance. The rally was triggered by a filing showing that global asset manager BlackRock had expanded its stake in Alteogen to 5%, along with news that July sales of the subcutaneous (SC) formulation of Keytruda rose about 262% quarter-on-quarter. Under Alteogen's structure, it earns royalties whenever products using its technology are sold, with related royalty and milestone revenue projected to reach KRW 200-300 billion annually.

Hosts noted that the inclusion of Alteogen in the long-term holdings list of a major institution like BlackRock, which prioritizes risk management above all else, itself signals that much of the clinical and technical validation skepticism previously raised about domestic biotech stocks has been substantially resolved. Alteogen's decision to remain on the KOSDAQ rather than transfer its listing to the KOSPI was also reassessed positively — had it moved to the KOSPI, the passive fund inflow effect would likely have been limited given its small weighting relative to Samsung Electronics and SK hynix.

Buoyed by Alteogen's strength, the KOSDAQ saw broad-based gains not only in biotech but also across secondary batteries, robotics, and semiconductor equipment/materials sectors, with nearly 100 stocks advancing.

According to a Wall Street Journal report, Apple is reportedly testing memory chips from China's ChangXin Memory Technologies (CXMT) for use across multiple product lines including the iPhone and MacBook. However, it was noted that adopting general-purpose memory chips could require design changes and that the price advantage is not substantial, so the likelihood of this materializing remains a subject of ongoing noise.

One brokerage cut its target price for Kioxia on the day. The firm explained that even as it raised its three-year earnings forecast and moved up its projected timing for average selling prices to bottom out, it lowered its target multiple because market confidence in the value of long-term supply agreements (LTAs) will take time to be validated.

Hosts pointed out that such target price cuts often reflect a structural practice in which analysts face pressure from their own brokerages when the gap between their rating and target price becomes too wide relative to the current share price. Cases where target prices are cut even as earnings forecasts remain unchanged have recurred repeatedly since the semiconductor sell-off, and speculation in some quarters attributing this to a conspiracy involving a specific investment bank's position unwinding was assessed as lacking credibility.

Morgan Stanley analyst John Kim, who had previously taken a bearish stance on the semiconductor cycle in his 'Winter Is Coming' report, issued a new report stating that the correction phase in the memory semiconductor cycle is entering its final stage. The report suggests a renewed uptrend is possible from recent lows, and that in the near term, valuation re-rating and expanded shareholder returns — rather than further upward revisions to earnings estimates — will be the key catalysts for share price gains.

The report highlighted three points to watch: AI capex, re-rating of long-term supply agreements (LTAs), and the memory cycle. The core thesis is that expansion of the AI investment cycle and the memory industry entering its later cycle stage can coexist — strong AI demand does not mean memory prices can rise indefinitely, and the market has yet to fully price in the demand visibility and cash flow stabilization effects provided by long-term supply agreements. Whether free cash flow translates into shareholder returns such as buybacks or dividends will be the key determinant of further multiple re-rating going forward. The report maintained a target price of KRW 2.6 million for SK hynix and KRW 375,000 for Samsung Electronics.

Hosts noted the significance of even John Kim, previously critical of the semiconductor market, now characterizing this steep sell-off as 'merely a minor bump.' They added, however, that the timing of this re-rating and buy call — ahead of the third-quarter earnings season — also carries the character of a routine seasonal comment rather than being driven purely by fundamentals. Some also suggested that whether these long-term contracts genuinely mitigate cycle risk will ultimately have to be proven through actual execution of shareholder returns.

The US July employment report released last Friday shocked markets, showing nonfarm payrolls fell by 23,000. Markets had expected an increase of more than 80,000, leaving a gap of nearly 100,000 versus expectations. June's figure was also sharply revised down from 57,000 to 20,000, and May's from 129,000 to 63,000. The unemployment rate came in at 4.1%, below the expected 4.2%, but this was interpreted as an illusion driven by a declining labor force participation rate and a 260,000 drop in the labor force itself. Average hourly earnings rose just 0.1% month-on-month, below the expected 0.3%.

By sector, construction employment rose on the back of expanded AI data center construction, while government employment fell by 53,000 due to seasonal declines in education jobs tied to summer break. Private-sector employment excluding government rose by 30,000, but this too fell well short of the market's expected 80,000. Analysis also pointed to a deterioration in job quality, with high-wage, full-time-heavy sectors like finance losing jobs while relatively low-wage positions increased.

With the cooling in employment now unmistakable, market expectations for a rate hike retreated sharply, with the implied probability falling from around 60% to about 46%. However, some voices also questioned the reliability of the US statistical system given the unusually large scale of the revisions. It was suggested that this week's CPI and PPI releases should be weighed together to form a comprehensive view of the direction for the September FOMC meeting.

Discussion touched on reports that as Japan seeks to sell US Treasuries to defend its currency, the US — wary of the impact on its own yields — is looking to intervene by holding those Treasuries at its own Treasury Department and instead paying dollars directly. It was noted that this approach could unintentionally expand domestic liquidity, creating a complicated situation in which raising rates further becomes difficult.

Concern was also raised about a common lack of policy leadership across major markets including the US, Japan, and Korea spanning macroeconomics, interest rates, and equity markets broadly. Whereas central banks or governments in the past would deliver clear messaging during periods of market turmoil, this kind of leadership has been notably absent since June, adding to market uncertainty and confusion in interpretation.

A normative argument was also raised regarding the treatment of research divisions and analysts within the securities industry. The point made was that brokerages should fundamentally be in the business of selling information rather than trades, yet domestic brokerages treat research as a cost center, resulting in poor treatment of analysts. It was argued that good information must reach the market for investor trust and market self-correction to function, making investment in and improved treatment of analysts necessary. It was further suggested that, just as Taiwan's TSMC has built trust by transparently disclosing monthly sales, domestic semiconductor companies should likewise disclose monthly sales to help overcome the undervaluation associated with being perceived as a cyclical industry.

Lee Kwangsoo pointed to a recent Bloomberg article and the KOSPI 200 volatility index (VKOSPI) as grounds for a possible market turnaround. The VKOSPI, which indexes investor expectations of market volatility over the next 30 days, spiked to as high as 90 in July but has recently fallen to around the mid-70s, which is interpreted as a sign that investor anxiety is easing.

He emphasized that what investors in capital markets truly fear is not simple losses but 'the possibility that something I don't know is happening' — volatility itself. During July, when volatility was elevated, it was difficult to buy no matter how far prices fell, but as volatility eases, investors may again begin considering whether it is time to buy undervalued stocks. The Bloomberg article also cited interviews in which foreign investors acknowledged the profitability and undervaluation appeal of the Korean market but said extreme volatility was keeping them hesitant to participate.

The direct cause of the falling volatility index was identified as declining trading volume in single-stock leveraged products. This is corroborated across several indicators, including narrower index swings, lower trading value, and reduced net buy/sell magnitudes by investor type. Lee Kwangsoo said that if volatility continues to trend lower, a period may arrive in which Korea's undervaluation appeal comes into focus, and that taking a longer view of the market rather than expecting a dramatic rally could lead to a more solid uptrend.