KOSPI Plunges Despite Rebound in U.S. Semiconductor Stocks as Foreign Selling and Solidigm Dual-Listing Concerns Weigh

KOSPI Falls More Than 4% Intraday Despite Rebound in U.S. Semiconductor Stocks The KOSPI traded around 5,616, down about 2.6%. It was down more than 4% at around 10:10 a.m. before recovering some ground. The KOSDAQ also remained in the 790s, down more than 2%, while the number of declining stocks rose sharply on both the Korea Exchange and the KOSDAQ. Foreign investors were net sellers in both the cash and futures markets. Selling in the exchange’s cash market continued at the trillion-won level, while futures selling exceeded KRW 500 billion intraday. The won strengthened, with the won-dollar exchange rate in the 1,329-won range, but the stronger currency did not offset weakness in equities. Foreign ownership of Korean semiconductor stocks stood at 48.2%, below the 59% recorded in 2019. In a market heavily weighted toward large-cap semiconductor stocks, declines in Samsung Electronics and SK hynix can deepen losses across the broader index if other stocks fail to rise enough to provide support. Analysts said a vicious cycle could emerge as falling stock prices prompt selling by index-tracking passive funds. Factors cited behind foreign selling included waning preference for AI hardware, profit-taking, and limited upside potential in the Korean market. Semiconductor stocks also faced continued selling in Taiwan, while Kioxia was reported to have fallen sharply from its peak. Some observers, however, said much of the foreign selling may already have taken place, potentially reducing the capacity for further sales. In the United States, the Philadelphia Semiconductor Index rebounded 1.6%, and memory stocks including Micron rose, but the gains did not extend to the Korean market. Wilson, a strategist at Morgan Stanley, said the U.S. equity correction appeared to be nearing its end and that investors should prepare to increase exposure to risk assets, focusing on quality stocks and companies with improving earnings. UBS interpreted selling in AI stocks as the unwinding of leveraged positions rather than damage to corporate fundamentals, while Howard Marks argued that market caution about risk made it difficult to conclude that an AI bubble was imminent. SK Group Stocks Weaken on Solidigm Listing Plans SK hynix fell more than 3% intraday, and other SK Group stocks, including SK Square, also weakened. Concerns about a dual listing resurfaced after reports that Solidigm had selected underwriters and was preparing for an initial public offering. Foreign media, including Bloomberg, also reported that South Korean financial regulators could examine whether Solidigm’s IPO would constitute a dual listing. SK hynix invested capital to acquire Solidigm and continued to support the company during its loss-making period. Concerns were raised that if Solidigm grew and then listed separately, existing SK hynix shareholders might not share sufficiently in the benefits of that growth. Since Solidigm is supplied with wafers by SK hynix, some also noted that interests over supply prices and profit allocation could become more complicated after a separation. The share price declines from their respective record highs cited on the broadcast were about 43% for Samsung Electronics, 58% for SK hynix, and 28% for Micron. SK hynix’s market capitalization was said to have fallen below KRW 900 trillion. Analysts said recurring dual-listing concerns, amid uncertainty over the semiconductor cycle and investor flows, were allowing even relatively small negative developments to heighten anxiety across the broader market. Memory Makers’ Share-Price Declines from Peak — The chart compares share-price declines for Samsung Electronics, SK Hynix and Micron. SK Hynix posted the steepest decline, while Micron’s was the smallest. CXMT Earnings Highlight Qualitative Gap in Memory Competition Chinese memory maker CXMT reported record quarterly results, but its share price fell. Revenue was projected to increase about 15% quarter over quarter in the third quarter, while its net margin declined to 47% from 53% in the second quarter. Net income growth was also said to have slowed from 113% in the second quarter to about 4% in the third. CXMT shares closed down more than 7% after the earnings release and remained weak in the next trading session. Analysts said revenue growth alone was not enough to show that the company had caught up with industry leaders; the key to competitiveness was the technology to manufacture products at low cost and generate profits. The decline in margins suggested that higher sales may have reflected favorable market conditions rather than the strength of CXMT’s own technology, they said. It is difficult to determine from preliminary results alone whether CXMT is actually narrowing the technology gap with Samsung Electronics and SK hynix. More detail will be needed from the business report scheduled for release on October 31, analysts said. The point was to distinguish the growth of a Chinese follower from the broader decline in investor appetite for the semiconductor industry. Samsung Electro-Mechanics and Korea Circuit Rise on Substrate Orders Samsung Electro-Mechanics and some substrate stocks rose despite weakness in the broader market. Samsung Electro-Mechanics secured an additional memory substrate supply contract, valued at about KRW 300 billion. It was reported to have signed seven long-term contracts since May, with their combined value exceeding KRW 4 trillion. Analysts said the series of new orders, alongside expansion plans, was helping to clarify the rationale for increasing production capacity. Korea Circuit surged more than 16% intraday, supported by a positive industry outlook from Meritz Securities. The report pointed to the possibility of a sustained upward trend in the stock price, based on the outlook for the industry in 2027. Samsung Electro-Mechanics’ share price had corrected sharply from its peak, but its continued order wins and capacity expansion drew attention. While target price cuts reflecting earnings concerns have become more common, Samsung Electro-Mechanics’ target price has been maintained relatively well. Caution was also expressed, however, that this did not establish that the share price correction was over or that the stock would recover its previous high. Defense Stocks Plunge After Hyundai Rotem Earnings Disappoint Hyundai Rotem reported third-quarter operating profit of KRW 247.1 billion. The figure was down 11% from a year earlier and about 10% below market expectations, sending the stock down more than 13% intraday. A series of reports cutting target prices followed the earnings release. SK Securities said the market could reassess medium- to long-term earnings growth based on export volumes once order momentum for the K2 projects in Iraq and Romania became more concrete. It also recommended a cautious approach until order uncertainty is resolved. Analysts said it remained to be seen whether the contracts would merely be delayed or whether potential customers’ willingness to buy had weakened. Reports also said the Defense Acquisition Program Administration could discuss sanctions against Hanwha Aerospace, including a restriction on bidding, in connection with alleged provision of money and valuables. The defense industry faces both expectations that geopolitical tensions could boost demand and concerns that actual contracts and revenue recognition may be delayed. The stronger won could also result in foreign-exchange losses, weighing on companies with relatively small operating profits. Oil and Treasury Yields Limit Benefits of Semiconductor Rebound Oil prices and interest rates were cited as factors behind the weakness in the domestic market despite the rebound in U.S. semiconductor stocks. WTI rose above $100 a barrel intraday before falling to about $98.8, while Brent was cited at around $109. Forecasts for oil prices varied widely among experts, ranging from $60 to $100. U.S. Treasury yields briefly topped 5% and were cited at around 5.139% during the broadcast. Concerns that increased AI investment and instability in Europe could put upward pressure on yields limited the rebound in semiconductor stocks. One view was that appetite for risk assets would struggle to recover unless oil prices and interest rates stabilized. The won-dollar exchange rate fell to the 1,329-won range, extending the won’s gains. A lower exchange rate can reduce import costs, but it can also reduce translated earnings for companies with high export exposure and relatively modest operating profits. For sectors such as defense, where contract timing and revenue recognition are important, exchange-rate moves and delays in securing orders can both affect earnings. International Oil Price Comparison — The chart compares WTI and Brent crude prices. Brent crude was cited as trading above WTI. Uncertainty Over Middle East Talks and Protests in Europe Add to Market Anxiety Conflicting reports about the activities of Iran’s Islamic Revolutionary Guard Corps and the prospects for negotiations increased uncertainty over the oil outlook. Views ranged from expectations of a deal in the near term to forecasts that tensions would persist. The market remained divided over how much risk to price in from potential disruptions to crude supply. Reports said protests had taken place in Italy following similar unrest in France and could spread to southern Europe. Political and social instability in Europe was also cited as a factor that could push government bond yields higher. Analysts said the combination of geopolitical tensions in the Middle East and instability in Europe had prevented the rebound in U.S. semiconductor stocks from carrying through to the Korean market. [Kwangsoo's Take] Dual Listings and the Flawed Tender Offer System Need Reform A mandatory tender offer system gives ordinary shareholders, as well as controlling shareholders, the opportunity to sell their shares on the same terms when a company is acquired. Under the prevailing practice, a buyer pays a control premium only for the controlling shareholder’s stake, leaving ordinary shareholders to bear any share-price decline in the market. This treats identical shares as having different values. The argument is that upholding the corporate principle of one share, one set of rights is central to reducing the Korea discount. A proposal discussed in the National Assembly drew criticism for limiting the mandatory tender offer to 50% plus one share, leaving shareholders without full protection. Critics also said the proposal did not adequately prevent an acquirer from first securing the controlling shareholder’s stake, thereby reducing the number of shares subject to the tender offer. After statements opposing the proposal, including one from the asset management industry, deliberations on the bill were put on hold. Calls continued for a fundamental redesign rather than limited amendments to the existing proposal. A national petition calling for a comprehensive review of the mandatory tender offer system and revised legislation was reported to require 50,000 signatures. The running count during the broadcast exceeded 27,000, and supporters set a next target of 40,000 to encourage further participation. With legislation delayed, the view was that investors could help accelerate change by joining the electronic petition and demonstrating public support for market reform. A Solidigm listing could further complicate the multilayered ownership structure within SK Group. Concerns were also raised that Solidigm’s performance and listing gains might accrue to an upper-tier holding company rather than to SK hynix shareholders. Critics said that if there was no clear reason to list a subsidiary separately while the parent company had sufficient funds, such a move could undermine the trust of existing shareholders. The argument was that companies should strengthen shareholder returns through measures such as treasury-share cancellations and dividends, while transparently demonstrating their long-term growth potential, in order to earn market trust. The view expressed was that having controlling shareholders retain their stakes and act as responsible shareholders would help reduce dual listings and other corporate governance controversies. The host also warned investors to be wary of impersonation-based investment chat rooms that approach them during market downturns with promises to recover their losses in one stroke.