KOSPI Falls Below 6,000 as Sell-Sidecar Triggered; Memory Concerns and Liquidity Gaps Fuel Capitulation

Around noon on October 13, the KOSPI was down about 6.9% at the 5,940 level, having fallen more than 6% intraday and triggering a sell-sidecar. The KOSDAQ was down 4.6% near 810 points. Advancers numbered only about 60 on the Korea Exchange and 150 on the KOSDAQ, as decliners vastly outnumbered gainers across the market.

Foreign investors were net sellers of about KRW 3 trillion worth of shares on the Korea Exchange, while buying roughly KRW 180 billion net on the KOSDAQ. Institutions were net buyers in both cash equities and futures, though the buying was said to be concentrated among financial investment firms. The won-dollar exchange rate stood at KRW 1,341, edging up after falling the previous day, with volatility also elevated.

Wall Street ended mixed. Higher crude oil prices and weakness in semiconductor stocks weighed on the market, but defensive shares performed relatively well, leaving advancers in the majority. Japanese and Taiwanese shares fell less than those in South Korea. The concentrated decline in the domestic market stood out against the larger number of advancers on Wall Street, despite a sharp drop in memory stocks there.

Earnings from U.S. financial firms and results from ASML and TSMC are due this week. In addition to results from major banks including JPMorgan, Goldman Sachs, Citigroup and Morgan Stanley, market participants will watch management commentary on lending and trading conditions. The annual meetings of the International Monetary Fund and the World Bank are also scheduled.

Reports said that Solidigm, SK hynix’s NAND subsidiary, had contacted global investment banks as it pursued a Nasdaq listing. Some argued that listing a subsidiary acquired overseas differs from the domestic practice of spinning off a core business. However, others maintained that a subsidiary listing can conflict with the interests of parent-company shareholders regardless of where it takes place.

Key questions include how Solidigm’s value will be reflected in SK hynix’s overall valuation and how much a new share issuance would dilute existing shareholders. In particular, concerns were raised that the multilayered ownership structure, with a U.S. entity between SK hynix and Solidigm, could make valuation difficult and prevent the subsidiary’s growth from accruing fully to the parent company’s shareholders.

Some also argued that the fairness of the arrangement should be scrutinized, given that the funds used to acquire Solidigm were raised at the expense of SK hynix and its shareholders: risks are shared when the business struggles, but value is separated through a standalone listing when it becomes profitable. From this perspective, claims that a listing could benefit relations with U.S. investors or local operations are not enough to resolve concerns about shareholder value.

APR, a cosmetics stock, also recorded a notable decline amid the market rout. Cosmetics shares were weak as the won strengthened, and several brokerages, including SK Securities, were reported to have lowered their price targets for APR. No specific target-price reductions or earnings forecasts were provided.

Goldman Sachs forecast that U.S. companies would issue about $600 billion in shares in 2027, a 98% increase from the previous quarter. The expected increase in share supply reflects IPOs and the release of shares from lock-up periods. At the same time, U.S. companies’ share buybacks could reach a record $1.7 trillion, potentially offsetting a substantial portion of the new supply, according to the analysis cited.

Nvidia’s announcement that it would increase the scale of its potential share buybacks was cited as one catalyst for a rise in its stock price. Micron was expected to be able to resume share buybacks from December 9, when restrictions related to U.S. government subsidies are lifted. Corporate buybacks and dividends drew attention as ways to absorb shares entering the market and support shareholder value.

China’s ChangXin Memory Technologies (CXMT) announced progress in a cell structure designed to increase density and said it would launch server DDR5 products by the end of this year. Renewed concerns about China’s technological advances in memory fueled selling across memory stocks in the United States and Asia. Micron closed below $1,000, while SK hynix ADRs fell about 4% in the U.S. market.

Kioxia plunged more than 10% during Japanese trading, while CXMT shares were said to have fallen for a third consecutive session, losing more than 12% cumulatively. Others countered that it remains to be seen whether China’s announcement will translate into actual mass production and market share gains. A prototype is not the same as mass production, they said, and yields, actual demand and product competitiveness still need to be assessed.

Concerns about the semiconductor cycle go beyond the possibility of increased supply from China. Continued investment in AI data centers and semiconductors depends on financing, and the CEO of Broadcom identified capital—the money needed for investment—as the biggest constraint on AI. The concern is that a shortage of funds could delay Big Tech investment and slow semiconductor demand.

The market was contending simultaneously with concerns about rising memory supply, slowing AI investment and China’s technological advances. Optimists argue that semiconductors are a key bottleneck in AI hardware and that supply shortages could persist beyond 2027; skeptics counter that the industry will eventually follow its cycle and pass its peak. Uncertainty was also heightened by the time it will take to confirm AI companies’ earnings and cash flows, as well as the results of Chinese manufacturers’ mass production.

The U.S. Consumer Price Index (CPI) for September is due on October 14, followed by the Producer Price Index (PPI) on October 15. Market estimates cited a 0.6% month-over-month rise in CPI and a 0.2% increase in core CPI. UBS forecast headline CPI growth of about 0.5% month over month and core CPI growth of about 0.19%.

Concerns emerged that rising gasoline and energy prices could push headline inflation higher than expected. Core inflation may be more moderate because it is less affected by oil prices, but CPI—and core CPI in particular—is the inflation data drawing the most attention this week. Whether the readings match market expectations could determine the market’s near-term direction.

The possibility of a Federal Reserve rate hike in October was described as low, with the probability of rates remaining unchanged said to exceed 80%. However, if inflation comes in higher than expected, markets could interpret that as increasing the likelihood of another hike later in the year, putting long-term Treasury yields, including the 10-year yield, at risk of rising. One view was that the market should be more alert to long-term than short-term rate moves.

Federal Reserve Chair Kevin Warsh is scheduled to speak on October 15 U.S. time, or October 16 in South Korea. As the remarks are due before the Fed’s quiet period begins, markets will be watching to see whether he offers a reassuring message or reaffirms a hawkish stance.

The International Energy Agency (IEA) is set to discuss details of a G7 strategic oil reserve release on Wednesday. The discussions were said to be due to conclude on October 15. The market will need to assess how international oil prices move from Thursday onward, once the scale and method of the release are clarified.

Higher oil prices were also identified as a factor that could push up U.S. CPI. Whether a release of strategic reserves eases energy price concerns, and whether its actual effect on supply is limited, will become clearer in the market’s response after the announcement. Alongside this week’s inflation data, oil prices were seen as a key factor shaping financial market volatility.

Kwangsoo Lee said the KOSPI’s sharp decline reflected a combination of concerns over semiconductor supply and demand and foreign selling, but that the day’s losses were driven largely by an excessive imbalance in market flows. While China’s memory announcement could weigh on the semiconductor sector, the simultaneous declines in less-related sectors such as cosmetics, construction and nuclear power suggested that ETF- and index-linked selling had amplified the losses. In his view, the market was in an oversold zone that could not be explained by the impact of the news alone.

He cited the Nikkei 225, which rose seven- to eightfold over the 13 years from 2012, but also experienced several declines of 20% to 30%. His point was not simply to urge investors to hold on based on long-term returns; rather, he stressed that what investors do during downturns shapes both their investment horizon and their results. Investors should reassess the losses they can tolerate and consider, according to their plans, whether the current decline is a rational response to a deterioration in corporate earnings outlooks, he said.

Lee offered a hypothetical: imagine winning the top lottery prize the previous day, then consider how to respond to a 7% to 8% decline in a day while still believing in the companies held and their growth prospects. The point was to regain composure and avoid treating the pace of the market’s recent rapid rise as normal. He said he did not believe the current decline was driven by news fundamentally changing corporate fundamentals.

Lee said the recent losses in South Korean stocks could not be explained by foreign selling alone, pointing instead to thinning liquidity and weakening confidence. Compared with late May and early June, when the market was strong, recent trading value had fallen to about 30% of those levels, weakening the pool of buyers available to absorb foreign selling. He called for market-stabilizing measures, scrutiny of short-term trading practices and policy discussions to support long-term capital inflows.

He proposed that converting just 30% of the roughly KRW 500 trillion in retirement pension assets to a fund-based equity investment model could create about KRW 150 trillion in long-term capital. Japan’s long-term market gains were accompanied by corporate buybacks and cancellations of shares, as well as increased dividends; he said the scale of Japanese buybacks and dividends also grew substantially from 2013 to 2024. Domestic companies and the government need to show they will protect shareholder value during downturns so investors can trust the market and hold shares for the long term, he argued.

Lee criticized parliamentary audits and market discussions for focusing too heavily on assigning blame for past events or debating leveraged ETFs, while giving too little attention to how to address future foreign selling and improve market structure. He said that if investment information merely reports short-term price movements and lacks responsible analysis, investors will keep buying when prices rise and selling when they fall. Investment fraud using artificial intelligence to impersonate public figures, along with poor-quality information distribution, were also cited as problems that add to investor anxiety.

Lee also linked the Solidigm listing debate to shareholder confidence and corporate governance. Rather than simply arguing that a listing is acceptable because it takes place overseas, he said the assessment should also account for how parent-company shareholders’ capital and risk were involved in the acquisition and business expansion. He stressed that for South Korea’s stock market to change, investors, companies, the government and the media must keep the issues in view and demand improvements, and that investor losses should not be attributed solely to individual errors in judgment.