KOSDAQ Holds Above 900 as Semiconductor MPE Stocks Rally; Rate Uncertainty Persists

The KOSPI attempted to regain the 7,000 level intraday but retreated, falling to 6,941 during the broadcast. Losses then widened, with the index down about 1.1% at an intraday low of 6,921. The KOSDAQ rose more than 2% to 915, reclaiming the 900 level for the first time in three months.

Early in the session, foreign investors were net sellers of about KRW 890 billion worth of KOSPI shares and net buyers of roughly KRW 100 billion worth of KOSDAQ shares. Late in the session, foreign net buying on the KOSDAQ was about KRW 120 billion, while institutional investors bought nearly KRW 50 billion. On the KOSPI, both foreign and institutional investors remained net sellers. The won-dollar exchange rate was around 1,343 won.

Samsung Electronics and SK Hynix weakened on the KOSPI, while roughly 950 KOSDAQ stocks advanced. Gains broadened to semiconductor materials, parts and equipment (MPE), secondary batteries and some biotech stocks. Analysts said the KOSDAQ’s rise appeared to be underpinned by improving industry conditions and earnings expectations, rather than a sharp rally in a few large-cap stocks.

The domestic market is scheduled to trade for only three days this week. On October 6, a Japanese 10-year government bond auction, remarks by Bank of Japan Governor Kazuo Ueda and the release of the U.S. trade balance for August are scheduled. Marvell Technology’s Investor Day and a Seoul AI and robotics event will also take place, while Chinese markets will remain closed through October 7.

The fifth launch of Nuri is scheduled for October 7. In the United States, AI-related events and corporate announcements will continue ahead of the release of the FOMC minutes, which are due at 3 a.m. Korea time on October 8. On October 8, Samsung Electronics is set to release preliminary third-quarter results, coinciding with domestic options expiry and the release of TSMC’s September revenue.

U.S. initial jobless claims and a 30-year Treasury auction are also scheduled for Thursday, offering a gauge of demand for long-term bonds. While the market has already anticipated much of Samsung Electronics’ results, analysts said the release could provide an opportunity to reassess the scale of earnings and the outlook. The domestic market will be closed on October 9 for Hangul Day, while France’s scheduled submission of a revised 2027 budget and a meeting of finance ministers remain variables for European bond markets.

Nvidia rose for a fourth consecutive trading session to a record high, with its market capitalization put at about $5.7 trillion. Singapore’s DBS said it was difficult to conclude that the AI rally was a bubble, noting that Nvidia’s 11-month forward price-to-earnings (P/E) ratio was only about 15. It also said that a simple comparison with Cisco Systems in the 1990s, when its forward P/E was around 100, was inappropriate.

DBS expects Nvidia’s earnings to grow about 70% next year and views the momentum behind AI semiconductors as still intact. It also proposed a barbell strategy combining AI growth stocks with investment-grade bonds. Amid significant macroeconomic uncertainty, Nvidia is being seen as a relatively stable investment given its large market capitalization and growth outlook, bringing valuation into sharper focus.

Samsung Electronics and SK Hynix shares failed to gain momentum amid foreign selling, despite favorable semiconductor industry conditions and earnings forecasts. Foreign ownership of Samsung Electronics and SK Hynix was cited at about 46.4% and 49.8%, respectively, compared with nearly 70% for Taiwan’s TSMC. The market interpreted this as a sign that confidence in the durability of earnings and the possibility of an extended memory cycle remained insufficient.

Some also suggested that selling could concentrate when the two companies’ share buybacks conclude. Samsung Electronics’ buyback could end as early as that day or the following day, while SK Hynix’s could finish in about a week; some investors were said to view the buyback period as an opportunity to take profits. Others expected temporary supply-demand distortions to ease once the buybacks ended, leaving earnings and underlying flows to drive share prices.

Lee Kwang-soo said the key issue was not the earnings of Samsung Electronics and SK Hynix themselves, but whether foreign investors had room to resume buying. He noted that after memory makers’ shares corrected overseas, they had recovered to 85–90% of their highs, whereas the two Korean stocks had risen less. He said that Samsung Electronics’ future cash generation could exceed the value of its shares in circulation, and that sustained shareholder returns, alongside earnings and visibility into long-term contracts, could help restore confidence.

Samsung Electro-Mechanics signed a contract to supply AI semiconductor substrate equipment to Hanmi Semiconductor. The company has signed six long-term supply contracts covering products including MLCCs, silicon capacitors and inductors, with their cumulative value put at about KRW 390 billion. The increase in supply contracts, following capacity expansion and equipment orders involving about KRW 600 billion in investment, was interpreted as a sign of resilient demand for substrates and MLCCs.

In Taiwan, substrate makers advanced as TSMC hit a record high. In Korea, Samsung Electro-Mechanics, LG Innotek and substrate-related stocks including Doosan, Simmtech and Daeduck Electronics rose. Samsung Electro-Mechanics was seen as demonstrating continuity in its business plans by continuing supply contracts and investment despite sharp share price fluctuations.

HLB rose on news that a U.S. Food and Drug Administration (FDA) inspection of a finished-drug manufacturing facility related to its cancer drug candidate rivoceranib had concluded positively. Concerns had previously emerged that the FDA review of a manufacturing facility in China could be stringent, but the latest news marked progress on the manufacturing issue that had drawn market attention. HLB Group stocks also advanced.

The broader KOSDAQ biotech sector did not post a clear rally that day, but expectations remain that positive developments related to technology licensing and clinical trials could cluster through year-end. Analysts said positive news at individual companies would need to translate into share price gains for subsequent biotech events to win the market’s confidence.

The first driver of the KOSDAQ rebound was the spread of expectations for improving semiconductor industry conditions to MPE stocks, as large-cap semiconductor shares stalled. Jusung Engineering rose to third place by KOSDAQ market capitalization, while Wonik IPS, Simmtech, EO Technics and Leeno Industrial also advanced. Some leading MPE stocks approached or continued to set record highs.

KB Securities said growth-stock valuations, which had been pressured by recent rate increases, could recover in the short term, and that MPE companies benefiting from improving industry conditions could attract attention on the KOSDAQ. Another interpretation was that funds had shifted from large caps to small- and mid-cap stocks, including MPE companies, in search of returns while Samsung Electronics and SK Hynix stalled. A scenario in which foreign capital flowed into large-cap semiconductor stocks while domestic funds went to MPE and other small- and mid-cap stocks was presented as a positive outcome that could lift both the KOSDAQ and KOSPI.

Expectations related to energy storage systems (ESS) continued to support secondary battery stocks. EcoPro BM said it would work with Samsung SDI to develop new all-solid-state battery technology, while the announcement of domestic ESS central procurement contracts is scheduled for November. Expectations for increased U.S. orders in 2027 also drew attention to how the outcome of the U.S. midterm elections in November could affect the policy climate for clean energy and ESS.

The KOSDAQ began the year at 930, rose as high as 1,226, then fell to the 600s before beginning to recover. It must exceed 930 to turn positive for the year. Analysts said the recent gains, based on improving conditions in MPE and secondary batteries, differed from a purely theme-driven surge.

Space and aerospace-related stocks also drew attention ahead of the fifth launch of Nuri. While many companies manufacture satellites, the supply of launch vehicles capable of carrying them into space is limited, with SpaceX cited as a leading launch provider. Lee Kwang-soo stressed that investors should look beyond the space industry as a whole and examine whether companies are connected to actual launch vehicle technology and supply chains.

U.S. nonfarm payrolls for September came in at around 20,000, far below market expectations of about 90,000, while the unemployment rate was 4.2%, above the expected 4.1%. Employment rose in education and health services, but hiring was weak in office-based sectors such as professional and business services, information technology and finance. A decline in government employment was also recorded.

The weak jobs report was interpreted as making it harder for the Federal Reserve (Fed) to raise rates, supporting equities. CME FedWatch put the probability of no rate change in October at 76.2%. However, the U.S. services PMI fell to 54.9 in September from the previous month, missing the market forecast of 55, while the prices paid index rose to 74, its highest level since July 2022.

The ISM services employment index rose to 50.1 in September from 47.8 in August, easing some concerns that the labor market was deteriorating sharply. Long-term yields fluctuated as rate-cut expectations and inflation concerns took turns gaining ground in response to the data. Labor market weakness is favorable for rates, but services prices and other employment indicators point in the opposite direction, making the rate outlook difficult to determine.

Selling pressure on French government bonds increased as passage of a budget aimed at reducing the fiscal deficit through parliament became uncertain. The spread between French and German 10-year yields widened to its highest level since the Southern European debt crisis of the 2010s, with the broadcast noting that it had reached 135. Political instability in Spain was also cited as a source of pressure on European bond markets.

Concerns mounted that opposition parties could reject the Macron government’s austerity budget, amid deteriorating French fiscal health and weak growth. Japan’s large holdings of French government bonds were another risk factor: if Japanese investors were to reduce their exposure, the pool of buyers available to absorb the bonds could shrink. Analysts warned that if high U.S. rates persisted, the burden could spread to countries with vulnerable fiscal structures.

By contrast, JPMorgan and Goldman Sachs were reported to have recently suggested that rates were nearing a peak. There are also hopes that falling rates could create a so-called Goldilocks environment, with growth and AI investment continuing while the economy and inflation stabilize. Markets are pricing in two opposing scenarios at once: rates staying higher for longer and rates having passed their peak.

Military tensions in the Middle East and uncertainty surrounding the Strait of Hormuz persisted, but international oil prices did not surge. WTI traded around $89 a barrel, and its gain during the broadcast was limited. With oil prices steady, an immediate energy price shock appeared unlikely to add significantly to upward pressure on long-term yields.

It was reported that tankers passing through the Strait of Hormuz under U.S. naval escort were continuing to transport oil by transferring their cargo to other vessels outside the strait. While there was talk that this method was bringing shipments close to prewar levels, releases from strategic reserves by major economies also affected the decline in oil prices. G7 countries agreed to supply the market with up to 100 million barrels of crude oil and diesel over the next four months.

Criticism was raised that none of the government’s KOSDAQ revitalization measures had been implemented within the year. The central proposal, a tier system for the KOSDAQ market, would divide companies into premium, standard and managed segments. Reports said its implementation could be pushed back from the original July target to after the second half of 2027, following possible dates in September and January of the following year. It was also argued that concerns about listed companies being removed from the market had increased share price volatility in related stocks during discussions of the system.

Plans to revise pension funds’ rules and evaluation criteria for KOSDAQ investment have also made limited progress. The National Growth Fund’s second subscription period was said to have opened after its first round and to run through mid-October, but interest and promotion were viewed as weaker than in the first round. Analysts said raising awareness of eligible companies and ensuring follow-through in the deployment of policy funds were important for market flows and corporate confidence.

Lee Kwang-soo identified uncertainty, rather than individual figures for employment, inflation or earnings, as the greatest pressure on markets. He said that a sharp rise in U.S. Treasury yields, followed by a prolonged period at high levels, would sustain uncertainty about the rate path and could spread pressure from the United States to vulnerable markets such as France and Japan. Korea, he said, had relatively solid momentum in semiconductors, exports and growth, giving it room to stand apart even in a high-rate environment.

Lee said that even when companies deliver strong earnings, foreign investors may hesitate to hold their shares for the long term if they view the results as a temporary boom in a cyclical industry. He argued that companies must demonstrate the durability of profits through long-term supply contracts and earnings visibility, and build shareholder confidence by maintaining—not making one-off—shareholder returns. He emphasized that returning capital to shareholders whenever a company generates profits matters more than conducting a single share buyback.

Lee also said government policies must be implemented consistently rather than left at the announcement stage. Delaying or inadequately communicating measures that could affect markets, such as the KOSDAQ tier system, changes to pension fund rules and the National Growth Fund, makes it difficult to earn confidence. He argued that this should not be blamed on the public’s so-called “pot mentality,” but viewed as an issue of institutions and leadership capable of sustaining a policy direction.