Global Long-Term Bond Yields Spike, KOSPI Plunges Over 5%... November Trump-Kim Summit Speculation Surfaces

On the 19th, the KOSPI widened its intraday decline to nearly 6.9% before entering closing territory down over 5%, dropping to around 6,508 points. The KOSDAQ was relatively resilient, briefly turning positive and trading around the 835 level. Despite the surge in US Treasury yields, the dollar index fell, pushing the won-dollar exchange rate briefly below the 1,400 level intraday.

On the flow side, foreigners net sold around 2 trillion won on the main exchange, while institutions continued net selling of over 1 trillion won. In contrast, foreigners net bought about 40 billion won on the KOSDAQ, highlighting a clear divergence in flows between large-cap and small/mid-cap stocks.

The New York stock market fell for a third straight session the previous day, with the Nasdaq leading the decline. As the US 30-year Treasury yield surpassed 5.3%, its highest level since 2007, the Philadelphia Semiconductor Index tumbled nearly 5%, directly spilling over into domestic semiconductor stocks.

The Nikkei fell over 2.5%, Taiwan's TAIEX dropped about 1.4% for a second consecutive day, and the Shanghai Composite fell 1.7%, as Asian equity markets declined broadly in tandem. Chair Powell's keynote speech at next week's Jackson Hole meeting and the FOMC minutes to be released tonight are drawing attention as the next variables for the direction of rates.

Hanwha Aerospace surged more than 13% early in the session on news that it had been selected as a prototype supplier for the US Army's next-generation self-propelled howitzer program, but pared gains amid the broader market weakness to close up around 1% late in the day. The company will supply six K9 self-propelled howitzer prototypes initially, with an option for 12 additional units; the maximum contract value including options is estimated at about $230 million (roughly 320 billion won).

Expectations are building that if the prototypes are finally adopted after 2-3 years of trials and testing, the deal could extend into subsequent operations and maintenance contracts, potentially expanding the cumulative value to as much as 30 trillion won. Supplying ground defense equipment to the US Army carries significant symbolic weight, as the US has historically procured its ground defense equipment domestically, making this an unusual case.

Citing an analysis from The Economist, the war between Ukraine and Russia exposed a severe cost imbalance — such as expending costly Patriot systems against cheap drone attacks — and revealed the limits of US domestic production capacity amid demand for weapons to counter China, underscoring the need for overseas procurement.

Rainbow Robotics posted second-quarter revenue of 12.3 billion won, up 98% year-on-year, but remained in operating loss. Robotis posted revenue of 15.3 billion won (up 95% year-on-year) with operating profit of nearly 2 billion won (up 700%), improving both top line and profitability simultaneously. In particular, Robotis's core actuator business posted operating profit of 3.4 billion won with a 23% operating margin, seen as a signal of performance differentiation beginning within the robotics sector.

Chinese robotics company Unitree listed on the 19th, with shares surging from an IPO price of 150 yuan to as high as 1,100 yuan intraday, closing around 883 yuan, up roughly 486% from the offering price. Its market capitalization, in Korean terms, is estimated to exceed LG Energy Solution but fall short of Hyundai Motor. A video released just before listing showed the robot jumping in place to a height of 2 meters and balancing while running at speed, reinforcing perceptions of its industrial applicability.

Around Hangzhou, China, more than 1,000 robotics startups related to Unitree are clustered, with high standards of working and living infrastructure and strong support from local governments, suggesting this is not merely an isolated corporate event but a broader industrial ecosystem trend. Around the same time, news emerged that memory chipmaker YMTC has entered the preliminary IPO review stage, following CXMT, confirming that China's semiconductor, robotics and AI industries are simultaneously accelerating fundraising and public listings.

Beyond the physical hardware embodiment of robots, China's large language models — which serve as the 'brain' — continue to see new releases following DeepSeek, raising the prospect that if the three pillars of semiconductors (chips), AI models, and robot hardware advance together, competitiveness could leap forward all at once. However, China's self-sufficiency in cutting-edge chips remains incomplete, suggesting time is still needed before all three pillars align simultaneously.

Domestic companies are also participating with booths at the World Robot Conference being held in China through the 23rd this week. Next week on August 26, Hyundai Motor will hold its '2026 Investor Day' in Yeouido to unveil its robotics business strategy, making it a notable event for gauging both domestic and global robotics industry trends.

The K-beauty (cosmetics) sector held relatively firm even amid the broad market plunge. Silicon2 rose about 3% on news of foreign investment attraction, while Dalba Global gained about 1%. Compared to the KOSPI's roughly 20% rise from its low (around the 5,500 level), the cosmetics sector's share prices have risen nearly twice as much, an indication of continued relative strength underpinned by earnings.

The US 30-year Treasury yield rose to 5.31%, its highest in 19 years. France's 30-year yield reached 4.87%, an 18-year high, and Germany's 30-year yield hit 3.75%, a 15-year high. Korea also set a record high above 4.7% the previous day, while Japan's 10-year yield rose to 2.93%, its highest level since 1996. In effect, long-term bond yields across major economies worldwide have simultaneously spiked to convulsive levels.

The transmission from rising bond yields to falling stock prices is generally explained through three channels. First is the asset allocation competition effect: as risk-free Treasury yields rise to the 6-7% range, investors increasingly favor bonds over relatively riskier equities. Second is the rising cost of corporate financing: companies accustomed to low rates now face funding costs in the 6-8% range, which can dampen investment and erode profitability. Third is the valuation discount effect: growth stocks are priced by discounting future earnings to present value, so as long-term rates rise, the discount rate increases, lowering the price level (multiple) that can be justified for the same earnings.

The root causes of the current yield spike were attributed to geopolitical risk, combined with the expansion of the US fiscal deficit (federal debt of roughly $38-40 trillion, fiscal deficit above 6% of GDP) and a rush of large-scale AI-related corporate bond issuance. Concerns were also raised that news of SoftBank pursuing its first-ever public retail corporate bond offering is adding to the strain on global fundraising markets.

US housing starts for July came in well below expectations, falling roughly 12.4% month-on-month, and industrial production also missed forecasts. Even recently resilient consumption indicators were noted as likely propped up by roughly $100 billion in one-time tariff refunds, raising concerns over a stagflation-like combination of slowing growth alongside persistent rate and inflation pressures.

Nonetheless, some forecasts suggest that continued rises in bond yields could naturally draw renewed demand as bonds become more attractive, and the possibility that the Federal Reserve could intervene to stabilize markets, such as at its September meeting, cannot be ruled out. Analysts noted that in the past, excessive rate increases triggered selling by so-called 'bond vigilantes,' followed by a settling pattern via policy intervention or a natural reversal in supply and demand — a pattern that has recurred repeatedly.

President Trump posted a map on social media depicting the area near the Strait of Hormuz as if it were US territory, in an unusually escalatory move amid heightened tensions with Iran. Iran, for its part, insists it maintains full control over the Strait of Hormuz, and the chain reaction from oil supply and prices feeding through to bond yields remains one axis of market unease.

With Israel's general election scheduled for October, there is speculation that tensions related to Iran could be prolonged for political purposes ahead of the US midterm elections. Markets expect that news of de-escalation, such as an end to hostilities, could ease the bond yield shock and act positively for equities.

Amid this backdrop, President Trump indicated intent to hold a summit with North Korean leader Kim Jong Un before the end of the year, with the APEC summit in Shenzhen, China in November cited as the most likely occasion. President Xi Jinping is also set to visit the US in September, leading to interpretations that the US is indirectly seeking China's mediating role in resolving the Iran issue. Since China is the largest importer of Iranian crude oil, analysts note China too has a stake in resolving the situation.

In the domestic market, inter-Korean economic cooperation stocks moved for a second consecutive day on related news. Some observers noted the situation could follow a pattern similar to the past Singapore US-North Korea summit, involving preliminary steps such as scaling back Korea-US joint military exercises before leading to a summit.

Corporate shareholder return policy was cited as a key variable that will determine the direction of the Korean stock market in the second half. With Samsung Electronics and SK Hynix having pledged to announce shareholder return plans within the third quarter, the specific method has become a focus of market attention. Shareholder return methods broadly fall into two categories: cash dividends and share buybacks with cancellation.

Cash dividends deposit cash directly into investor accounts, making them visible and advantageous for dividend-focused investors, but their effect on share prices tends to be a one-time event limited to the dividend date, and in Korea they also carry a dividend income tax burden. By contrast, buybacks followed by cancellation reduce shares outstanding, improving supply-demand dynamics while also boosting earnings per share (EPS) for the same net income, which was emphasized as producing a more sustained, structural boost to share prices.

Korean listed companies have generally favored cash dividends. As of 2025, the payout ratio for KOSPI-listed companies stood at around 31%, but the recent downward trend in this ratio stems from the fact that, excluding semiconductor companies, the payout ratio has actually risen steadily. In other words, semiconductor companies failing to sufficiently raise dividends relative to their surging profits was identified as the main driver of the overall decline in the payout ratio.

By contrast, companies in the US Russell 3000 Index have long favored buybacks and cancellations far more than dividends. As a result, even though net income growth was not as large relative to share price gains, a structure took hold in which per-share earnings steadily increased due to the reduction in shares outstanding, which was cited as a driving force behind long-term share price appreciation.

In Samsung Electronics's case, expectations for dividend expansion are high, with dividend yield estimates cited as high as 7-9% and over 10% for preferred shares, but the key point to watch for the sustainability of a second-half rebound in the Korean market is how large a share buyback and cancellation program will be, rather than the dividend itself. It was also suggested that while a one-time dividend announcement may produce only a brief, short-lived effect, a sustainable buyback-and-cancellation policy could keep share price momentum going even after the announcement.

Korea's securities-related class action system was criticized for extremely limiting the grounds for suits to just four categories — stock price manipulation, accounting fraud, and false disclosure — leaving the vast majority of corporate wrongdoing outside these criteria to require individuals to sue separately. To qualify as a plaintiff, a certain proportion of total outstanding shareholders must be gathered, creating a structural contradiction whereby the larger the company — such as Samsung Electronics, with roughly 8 million shareholders — the more practically impossible it becomes to assemble a plaintiff group.

There are also restrictions on which law firms can represent such suits — only firms that have handled three or fewer class actions in the past three years are eligible. This creates the paradoxical result that the most experienced and capable large law firms are effectively barred from taking on such cases.

An even more decisive problem is that the lawsuit process is structured in two stages: a preliminary certification procedure (disputing whether the requirements are met) and the main trial. The preliminary procedure alone can go all the way to the Supreme Court (third instance), and the main trial cannot even open — it is automatically suspended — until the preliminary procedure receives a final Supreme Court ruling. Korea is reportedly the only country with this dual triple-instance structure, and it has taken an average of about 6-7 years just to clear the preliminary procedure. Since Korea's first securities class action was filed in 2005, the first case to clear the Supreme Court hurdle did not come until 2020 — a full 15 years.

A representative example cited was the Tongyang Securities commercial paper (CP) mis-selling case. Despite knowing about the insolvency of affiliated group companies, the firm sold the CP to investors as safe, causing losses to thousands of people totaling in the trillions of won, and the responsible executive was convicted of fraud. Yet the victims' class action for damages was finally decided against all plaintiffs by the Supreme Court in 2024. Over the course of the 6-7 year preliminary procedure and main trial, most victims gave up and dropped out of the suit, leaving only a small remainder who received no compensation whatsoever when the case concluded.

This structure was pointed to as ultimately allowing companies to act without real fear of consequences for unlawful conduct, with reforms such as easing plaintiff eligibility requirements, relaxing restrictions on legal representation, and strengthening punitive damages proposed as prerequisites for cleaning up the market. The piece concluded by calling for substantive reform discussions to take place through the regular National Assembly session in the second half of the year.