US Announces Secondary Sanctions Targeting Iran as SK Hynix Wage Deal Rejected, Denting Investor Sentiment

The KOSPI fell over 2% during the session, dipping past the 6,540 level, while the KOSDAQ failed to recover the 900 mark, sliding around 1.7% to trade in the 799-point range. During the session, foreigners continued net selling of about 2.3 trillion won on the KOSPI and around 50 billion won on the KOSDAQ, while recording net buying of roughly 180 billion won in the futures market. The won-dollar exchange rate rose as high as 1,383 won, staying in the upper-1,300 range, while the dollar index fluctuated between the 98 and 99 range.

Losses narrowed somewhat as the session progressed. The KOSPI 200 volatility index fell for a second consecutive day to around 0.69%, and losses on the domestic market eased after news that talks between Pakistan's interior minister and Iran's president had concluded positively. Toward the close, the KOSPI recovered most of its losses to finish down about 1.1% at 6,618 points, while the KOSDAQ ended nearly flat, down about 0.03% at 812 points.

US Treasury yields, however, did not ease easily. The 2-year yield stood at 4.25%, the 10-year at 4.7%, and the 20-year and 30-year at around 5.23% and 5.24% respectively, remaining at burdensome levels. The main driver of the day's decline was weakness in Samsung Electronics and SK Hynix, with foreign investors continuing to sell those two stocks in particular, though semiconductor materials, parts and equipment names as well as robotics-related stocks on the KOSDAQ gained ground, with many names finishing in positive territory.

SK Hynix opted for a 40 trillion won share buyback and cancellation. Because SK Square is required to maintain a stake of at least 20% in Hynix, canceling treasury shares automatically defends the holding company's ownership ratio. Samsung Electronics, by contrast, had no choice but to focus on cash dividends (30 trillion won in the first tranche) rather than share cancellation, as analysts noted that Samsung Life and Samsung Fire each hold 9.999% stakes in Samsung Electronics, putting them at risk of breaching the 10% threshold under the Financial Holding Companies Act if shares were canceled.

The hosts pointed out that with Samsung Electronics needing to spend more than 600 trillion won on shareholder returns over the next three years, it cannot rely on dividends alone. They proposed an alternative in which the company buys back the Samsung Electronics shares held by Samsung Life and Samsung Fire and cancels them in the same proportion as shares held by the general market, which would preserve Lee Jae-yong's and the group's ownership stake while still achieving the effect of a treasury share cancellation. In this scenario, Samsung C&T's stake could actually rise.

On the day, Samsung Electronics fell about 1.7% and SK Hynix about 3%, each holding up relatively well under the circumstances. SK Hynix, however, ran into a setback as its tentative labor-management agreement — under which performance bonuses would be paid 60% in stock and 40% in cash — was rejected by union members, with 50.1% voting against it. The result was narrow, decided by a margin of just 25 votes among roughly 15,000 union members.

The rejection is significant because paying bonuses in stock rather than cash offered two key benefits: improving the company's financial structure and generating additional demand for treasury share purchases. The rejection came despite a clause modeled on TSMC that would compensate for any price decline relative to a reference date, raising concern that the market could misread it as a negative signal — that even union members, as insiders, are reluctant to receive stock.

The hosts diagnosed this not as a failure of individual workers' judgment but as a result of the company's neglect of internal investor relations — that is, sharing its vision and business outlook with employees. Despite favorable industry conditions, including a 70% global market share in HBM and supply to Nvidia's Vera Rubin platform, the company's future vision has evidently not been adequately communicated to its own employees. They advised that management should invest as much effort in briefings for employees as it does in meetings with overseas investors and media.

Hyundai Motor's labor and management reached a tentative wage agreement after 111 days of negotiations. The deal centers on a 100,000 won increase in base pay and performance bonuses exceeding 400%. The company's first full-scale strike in a decade reportedly caused sales losses exceeding 2 trillion won, and attention now turns to whether Hyundai Motor, which has struggled with weak earnings, can use this agreement as a springboard for a rebound.

A day after the wage deal, Hyundai Motor's Investor Day will be held at 2 p.m. in Yeouido. The market's biggest focus is the concrete timeline for the humanoid robot business. JPMorgan recently valued Hyundai Motor Group's robotics business at $57 billion in a report, offering a positive assessment of the productivity gains and workforce flexibility that humanoid adoption could bring.

Nuclear power-related stocks rallied broadly after an exclusive media report that the US and South Korea are discussing a joint investment in Westinghouse. Hyundai Engineering & Construction jumped about 13%, and KEPCO Engineering & Construction rose about 9%. The Ministry of Trade, Industry and Energy denied the report twice, but the hosts noted that only specific figures (such as the $210 billion figure) may differ, while negotiations themselves are likely still underway — observing that "strong denials often hint at the truth."

The Westinghouse issue matters because it has long been an obstacle blocking Korea's nuclear exports. Westinghouse, having transferred nuclear technology to Korea in the past, has used a clause requiring its approval for overseas exports to obstruct deals such as the Czech contract. Korea has countered that the technology from 50 years ago differs from today's, but on the international stage, US influence has generally prevailed.

Analysts said it would be significant if Korea were to participate in an equity investment in Westinghouse, as it would allow Korea to move from a subordinate position seeking permission to that of a shareholder and board member directly involved in discussions on entering major nuclear order markets such as the US and Europe. It was also noted that Westinghouse relies heavily on Korea's Team Korea companies for much of its actual nuclear design and construction capability, suggesting deeper cooperation could benefit both sides.

Details still remain to be settled, including how much of the 20% call option held by the US government would be allocated to Korea, and whether the arrangement would be limited to a simple equity stake or would include management and technology participation rights as well. Nevertheless, with nuclear power emerging as an essential growth sector amid surging electricity demand in the AI era, confirmation of these talks was seen as likely to provide positive momentum for Korean nuclear power companies.

According to CNBC, reports emerged suggesting the US Treasury could use its General Account (TGA) held at the Federal Reserve to purchase up to $1 trillion in Treasury bonds. The TGA is an account where leftover cash from fiscal revenue and spending accumulates, and it currently holds roughly $950 billion. With the next debt ceiling deadline not until next winter, the plan would be to first draw down this cash to buy long-term bonds and suppress yields.

This approach drew attention because it could lower long-term rates without issuing additional short-term debt and without directly touching the Federal Reserve's independence. Indeed, effects appeared in the short term, with the 10-year yield falling to around 4.6% and the 30-year dropping below 5.3%. Skepticism was also raised, however, that $1 trillion is not large relative to the overall $34 trillion Treasury market.

The controversy escalated after legendary investor Stanley Druckenmiller directly criticized the policy in a Wall Street Journal op-ed. He argued that rising long-term rates are not a market malfunction but a normal price response to high inflation and large fiscal deficits, and that if the Treasury buys bonds to suppress those rates, it would effectively amount to Treasury-run quantitative easing, eliminating the last remaining mechanism for fiscal discipline. His core argument was that the fundamental solution is to reduce the fiscal deficit itself.

Druckenmiller's remarks carry particular weight because he has long-standing ties to Treasury Secretary Bessent and Fed Chair Warsh. His public criticism of the policy's effectiveness and side effects, coming from essentially the same camp, led the market to anticipate a tough tug-of-war ahead between the government and the market.

The underlying causes of rising Treasury yields were identified as an increase in bond supply driven by the expanding fiscal deficit, coupled with weaker demand for Treasuries amid inflation concerns stemming from war risk. The only fundamental solutions are cutting the fiscal deficit or ending the war, and since cutting social security and welfare spending is politically difficult, raising corporate taxes while preserving investment tax credits was suggested as a more realistic alternative.

This rate standoff was cited as the single most important variable for the market through August and September. The simultaneous rise in gold and bitcoin on the day was also interpreted as reflecting market concerns over dollar weakness and distrust of government policy.

US Treasury Secretary Bessent announced in the early hours (Korea time) a sanctions campaign targeting Iran's global financial links, called "Operation Economic Outcast." He pressed Iran with a binary choice — normalization or complete isolation — and stated that secondary sanctions would be imposed on third countries dealing with Iran across five sectors: cryptocurrency, technology, gold, aviation, and shipping. He stressed that enforcement would begin on the day of the announcement.

The problem is that the specific sanctions targets, implementation dates, grace periods, criteria for determining violations, and the actual tariff levels to be applied all remain undisclosed. While a list of more than 60 sanctioned entities has already been released, China — widely regarded as Iran's largest transshipment partner — is notably absent from the list, prompting the market to question its effectiveness. The hosts noted that the very secrecy of the strategy could itself be evidence that no concrete implementation plan yet exists.

Analysts suggested the sanctions' real aim is to economically strangle Iran into returning to the negotiating table, while simultaneously serving as leverage against China ahead of the US-China summit planned for September. Iran's rial has reportedly plunged, with the unofficial exchange rate soaring to 2.2 million against the official rate of 1.5 million, and prices for staples such as rice and beef have reportedly risen anywhere from tens of percent to two or three times pre-war levels, reflecting a serious economic crisis.

Concerns were raised, however, that Iran is unlikely to back down easily. Since the outbreak of war, Iran has attacked more than 40 tankers and merchant vessels, and it was noted that Iran has already learned asymmetric tactics using low-cost drones and small missiles to impose heavy costs on its adversaries. Additional provocations, such as renewed blockades of the Strait of Hormuz or cutting undersea fiber-optic cables on the opposite side of the Red Sea, were also cited as possibilities.

Ultimately, the outcome hinges on whether US pressure forces Iran to capitulate or instead fuels greater resistance, further stoking Middle East-driven inflation concerns and oil price uncertainty. With the US midterm elections approaching on November 3, it was also suggested that time works in Iran's favor the longer it stalls, while the US is likely to grow increasingly impatient.

Kakao announced a spin-off splitting the company into two entities, Kakao X and Kakao AI. Kakao X would be allocated KakaoBank, KakaoPay, Kakao Pay Securities, Kakao Entertainment, Kakao Mobility, and Kakao Investment, among others, while Kakao AI would be assigned the KakaoTalk platform along with the maps, advertising, and commerce businesses. The spin-off is scheduled for completion on January 1, 2027.

Kakao has already carried out five prior spin-offs since 2017, involving KakaoPay, Kakao Mobility, Kakao Commerce, Kakao Enterprise, and Kakao Healthcare. Market analysts noted that Kakao X, having already had its full corporate value priced in, could instead face a further discount, while Kakao AI remains merely a plan for what it intends to do with AI rather than an executed strategy, warranting a wait-and-see approach to valuation.

The hosts pointed out that while Meta simply rebranded from Facebook without repeatedly splitting off its business divisions, Korean internet firms founded by individual entrepreneurs have been especially prone to excessive spin-offs. They argued that governance issues such as ownership structure and split ratios are crowding out market attention that should be focused on actual industry competitiveness and earnings structure.

Speculation about KakaoTalk being spun off had circulated for a long time, and the fact that it has now materialized after the company repeatedly denied such plans was cited as a source of significant market fatigue. Even the explanation that a spin-off, being a stock-type split, causes no harm to existing shareholders drew pushback, with critics noting that actual gains and losses could diverge depending on the split ratio (roughly 0.36 to 0.64).

It was noted that Naver and Kakao, once dubbed "national stocks" that earned the trust of retail investors, are now cited as examples that instead deepen distrust in Korean equities due to repeated spin-offs and opaque decision-making. While hardware companies such as Samsung Electronics and SK Hynix deliver results through AI semiconductors, Naver and Kakao, as leading software companies, were urged to respond to the earnings the public has generated for them with more accountable management.