Samsung Electronics Surges Inexplicably Amid Sharp Drop in Volatility Index, Government Unveils Semiconductor Mega Project Special Act

After extreme volatility in Korean equities through July, the KOSPI 200 volatility index turned decisively lower in August. Having once spiked to the 90 level, the index has fallen to around 75, extending a roughly 9% decline from the previous day. The volatility index measures investors' expected price swings over the coming 30 days and serves as a barometer of market anxiety.

The panel explained that what investors actually fear is not simply losses but volatility itself — unpredictability. During periods of high volatility, it becomes difficult to buy even as prices fall, and the recent easing in volatility was seen as an opportunity for investors to reassess undervaluation appeal.

Bloomberg cited the same KOSPI 200 volatility index chart and noted the stabilizing trend since August began. The direct cause of this decline in volatility was identified as a sharp drop in trading volume of single-stock leveraged products. While some in the market had argued that single-stock leverage was merely a scapegoat for the decline, the panel reaffirmed that the product was in fact a decisive factor behind the sell-off.

A foreign investor featured in a Bloomberg interview acknowledged Korea's earnings outlook and undervaluation appeal but said extreme volatility was keeping them on the sidelines. The panel suggested that if the volatility index continues to trend down, Korea's undervaluation could come into sharper focus and mark a turning point for foreign capital inflows.

The KOSPI built on early gains of around 0.9% intraday to climb toward 6,359, and by the close was up about 1.3% at 6,379, extending gains for a second straight session. The KOSDAQ traded roughly flat around 850 as it consolidated after surging more than 6% the previous day. The won held stable around 1,415 per dollar.

Even as the KOSPI has fallen about 4% so far in August, several stocks have shown strong post-earnings performance. Samsung Electro-Mechanics rebounded notably in August, helped by a base effect from its earlier sharp decline and annual net profit growth exceeding 89%, while LG Energy Solution, Doosan Enerbility, Samsung SDI, LS Electric, Hyosung Heavy Industries, Korea Aerospace Industries and Hanwha Systems also gained on strong net profit growth.

Construction stocks also notably outperformed the KOSPI. Daewoo Engineering & Construction and GS Engineering & Construction offered positive earnings and forward guidance, recovering some of their earlier declines. Cosmetics-related stocks also stood out on the day, with Korea Cosmetic Manufacturing surging 17% and Cosmecca Korea, Kolmar BNH and Manyo Factory extending gains. Continued export growth was cited as the driver behind cosmetics stock gains, with earnings due out August 13-14 flagged as worth watching to confirm the trend.

The panel emphasized that individual investors, too, need to build a habit of consistently tracking their holdings' revenue and profit trends, noting that while the earnings filing deadline is nominally August 15, it can be pushed to the 17th or 18th due to holidays, and cautioned investors to be careful with stocks that fail to file within the deadline.

Samsung Electronics extended its intraday gain to 3.9% and by the close was up around 5%, touching the 240,000 won level. Trading volume surged 82% versus the prior session — an unusual level to reach with more than three hours still left in the trading day.

The host and panel could not identify a clear catalyst throughout the broadcast. However, they noted that small and mid-cap construction stocks tied to Samsung's Gwangju semiconductor investment — Kumho Construction, Namhwa Construction, Dongyang Pile, Namhwa Industry, Seosan and others — hit their upper limit en masse, following the president's remarks the previous day that Korea should move 'beyond a speed campaign to a blitzkrieg' on the project. This raised speculation that expectations around Samsung's investment and project plans were being priced in, but doubts remained since, under the same logic, SK Hynix should have risen too, which it did not.

A shift to foreign net buying in Samsung Electronics and SK Hynix was detected intraday, though the scale appeared too small to be identified as a clear cause. SK Hynix pared its losses and turned positive, closing modestly higher before extending gains to around 1.4% later in the session.

The panel also pointed to potential earnings improvement as a backdrop for both stocks. Based on semiconductor export figures for August 1-10, they estimated third-quarter operating profit at 110 trillion won for Samsung Electronics and 73 trillion won for SK Hynix, versus market consensus of roughly 113 trillion won and 78 trillion won respectively. However, the consensus was that the export figures alone could not explain the sharp rally in any single stock.

SK Hynix, which had been steadily buying bonds other than government bonds with its surplus cash, abruptly halted purchases of an upcoming bond issuance the day before, according to reports. The market had expected SK Hynix — flush with cash from strong earnings and even hiring bond investment staff — to keep buying continuously.

The panel offered two interpretations of the halt. One is that it reflects pushback against market concern that issuers were becoming overly dependent on SK Hynix as effectively their sole buyer, prompting a search for other buyers. The other is that SK Hynix, which had been locking up funds mainly in three-year maturities, may now want to keep cash more liquid in preparation for future cash deployment such as shareholder returns. Given recent criticism that its shareholder return policy has been inadequate, the latter interpretation would suggest the company is preparing to deploy funds.

Speculation also resurfaced around a potential Nasdaq listing for Solidigm, SK Hynix's NAND subsidiary. According to reports including the Chosun Ilbo, SK Group is reportedly considering consolidating its AI-related businesses and growing them via a Nasdaq listing, raising dual-listing concerns since it would involve re-listing overseas a subsidiary of SK Hynix, which is already listed domestically. However, since the entity in question is an existing acquired company rather than a newly established one, it may qualify for an exemption from the dual-listing ban set to take effect in August 2027.

The panel argued that listing a company acquired with SK Hynix shareholders' capital in the US cannot fundamentally be separated from the dual-listing issue, and stressed that the company needs to clearly explain why it is pursuing a listing now, given it has no apparent need for listing-related capital. They also noted that a fundraising rationale would raise dilution concerns and would not align with what shareholders want.

Separately, SK Hynix became the largest shareholder of Kioxia through its participation in a consortium that acquired a stake in Toshiba, and reportedly booked substantial gains from selling related shares last quarter. How the company manages its remaining Kioxia stake going forward was flagged as a point to watch.

Nvidia shares fell about 2% in New York trading on news that the company is working with major asset managers and financial firms — Apollo, Blackstone, BlackRock, Brookfield, Goldman Sachs, KKR and others — to arrange roughly $500 billion in financing for AI infrastructure buildout. Some critics labeled the arrangement 'circular financing.'

The panel assessed that the structure is not Nvidia directly lending money but rather one in which financial firms issue bonds sold to third-party investors, with Nvidia providing guarantees on the bonds or pledging data center and chip equipment as collateral. This differs in nature from the classic circular-financing pattern in which Nvidia lends money to customers who then use it to buy Nvidia's own chips.

Bank of America assessed that GPUs and data centers have become an investable asset class in their own right. The interpretation is that data centers are being treated as a form of real estate, with financing structured around the physical assets much like existing data center REITs. The panel said this financing approach differs in character from circular-financing concerns, and that since the bottleneck in AI expansion has been a shortage of capital rather than demand, this could actually be an opportunity for the ecosystem to grow further.

TSMC's July revenue rose 44% year-over-year and 5.6% month-over-month. Bloomberg noted robust AI hardware demand and projected third-quarter revenue to rise 46% year-over-year. Given that TSMC's fabs are already running at full capacity, the panel judged that the revenue increase reflects price hikes — particularly in sub-7nm advanced processes — rather than volume growth, suggesting third-quarter profitability could improve further.

Semiconductor exports for August 1-10, released the same day, totaled $10 billion, a record for the period in August. Excluding DRAM modules, exports rose 4% month-over-month, while including DRAM modules they fell 16%. NAND flash exports rose 54% month-over-month, showing a recovery. By export unit price, NAND rose a striking 93% month-over-month while DRAM edged slightly lower, indicating the recent memory price rally has been led by NAND rather than DRAM. In contrast, auto exports plunged 80.9% year-over-year, a stark contrast with semiconductors.

At a meeting chaired by the president the previous day, the government announced plans to push a semiconductor mega special zone special act this year. It will separately establish a new 5 trillion won semiconductor fund focused on promising materials, parts, equipment and peripheral firms, and will invest 1 trillion won over the next decade in projects where large and small companies jointly work from technology development through pilot production to mass production. A special act aimed at easing regulations that hinder regional investment will also shorten permitting and environmental impact assessment timelines.

The plan calls for launching investment projects worth more than 200 trillion won in the Chungcheong region and more than 100 trillion won in the Yeongnam region within this year, along with a plan to temporarily relocate and disperse the Gwangju air base by the second half of 2028. Buoyed by the news, semiconductor equipment stocks broadly rallied, with Jusung Engineering up more than 9% and Wonik IPS up more than 4%.

The panel noted that large national projects typically take two to three years just for procedures such as environmental impact assessments, which has slowed progress in the past. They highlighted the significance of the president directly citing TSMC's Kumamoto plant, which took just one year and ten months from groundbreaking to completion, and expressing intent to handle all procedures as a one-stop process. They stressed, however, that the government must actually keep to this timetable for companies to be able to prepare their investment plans and capital.

Remaining challenges cited include securing the central government's trust with the region receiving the relocated Gwangju air base, securing water supply amid drought conditions in the southern region where reservoir levels are only at 10-20%, and expanding the power grid early. Disagreements have already surfaced between local governments over concerns that water would be drawn from the Chungcheong region, underscoring the need for central government coordination.

The panel noted that Korea has built more seawater desalination facilities than any other country in the world, suggesting the water supply issue, too, is a surmountable challenge, and expressed optimism that if this mega project proceeds as planned — leveraging Korea's ability to break ground on plants quickly — it would significantly boost the competitiveness of the semiconductor industry over the next decade.

Park Sidong argued that behind the single-stock leveraged product issue that has roiled the market for more than a month and a half lies a more fundamental, long-neglected problem in ETF design. Many ETFs tracking the KOSPI 200 have their entire index movement tied to the swings of just two stocks, Samsung Electronics and SK Hynix, so that when those two decline, unrelated stocks in the index get indiscriminately sold off as well — a pattern that has repeated itself.

He noted that Japan's Nikkei 225 caps any single stock's weight at 10%, the US Nasdaq 100 caps it at 24%, and major overseas indices such as the Russell and MSCI apply similar limits, whereas in the KOSPI 200, Samsung Electronics' weight exceeds 33% and SK Hynix's exceeds 25%, with the two combined nearing 60%. He contrasted this with the Nasdaq 100, which not only caps any single stock at 24% but also imposes a second cap limiting the combined weight of stocks exceeding 4.5% individual weight to no more than 48%, a design meant to prevent a handful of large stocks from dominating the index's overall volatility.

Park criticized that while ETFs exist to offer investors lower volatility and greater stability than individual stocks, domestic ETFs currently just replicate market-cap weights and move identically to the index, losing their reason for being. He also pointed to overly strict tracking-error regulations that leave funds with no 'room' to act even slightly actively.

He proposed that this episode should prompt a fundamental redesign of the ETF system as a whole — introducing caps on individual and combined large-stock weights and granting index-tracking funds a minimum degree of discretion. Since many citizens invest in ETFs through retirement pensions, he stressed that design flaws can directly translate into investor harm, and called for advance checks to ensure that new promotion/relegation-linked ETFs planned alongside the KOSDAQ market overhaul do not repeat the same problem. He also added that the practice of selling single-stock leveraged products tied to Samsung Electronics alone under the label of a 'fund' warrants reexamination.