[Closing Market] KOSPI Tumbles to 6,300 Range amid Foreigners' Selling Bomb

On the afternoon of Oct. 12, the won-dollar exchange rate, KOSPI and KOSDAQ indices are displayed on the electronic board at the dealing room of Hana Bank headquarters in Jung-gu, Seoul. (Yonhap) On Oct. 12, the domestic stock market closed with a significant drop as it faced a fierce selling offensive from foreign investors. As the upward pressure on United States Treasury yields and vigilance toward global technology stocks intertwined, the index failed to escape a bearish trend throughout the session, and major semiconductor driving forces were knocked down simultaneously, strongly dragging the index down. Amid the growing anxiety of market participants, this article details the overall closing conditions of the domestic stock market on this day, supply and demand trends by investor type, the fluctuation ranges of major top market capitalization stocks, and the flow of the turbulent foreign exchange market. The KOSPI accepted a shocking report card of closing at the 6,300 level, plunging sharply compared to the previous trading day. After the index started with a significant drop from the previous session, it steadily increased its decline as the pressure of offloading volumes from institutional and foreign investors intensified. It is a situation where the risk aversion sentiment and inflation pressure concerns that have spread across the overall global stock market delivered a direct hit to the domestic stock market as well. The KOSPI index closed at 6,384.24, down 241.69 points (3.65%) from the previous session. The extent of the decline is the largest in over a month since on September 2 (-3.99%). This index continued its consecutive weakness since on this day, recording a drop of 619.50 points (8.85%) in 4 trading days. The KOSPI 200 Volatility Index (VKOSPI), referred to as the Korean fear index, rose 10.65% to record 40.73. The KOSDAQ market also could not avoid the blow. The KOSDAQ index showed a steep plunge of over 4% compared to the previous trading day, proving that investor sentiment had frozen. It was a day where volatility was maximized in both markets as program selling volumes poured out along with the plunge of leading stocks. The KOSDAQ index closed at 849.19, down 43.08 points (4.83%) from the previous session. The KOSDAQ index decline rate was the highest since on July 29 (-6.12%), when market volatility was high. Foreign Investors Drove the Index Plunge by Dropping 2 Trillion Won Net-Selling Bombshell in the KOSPI Market Alone The biggest culprit of the stock market decline on this day was undoubtedly foreign investors. Foreigners drove the index plunge by dropping a massive net selling bombshell nearing 2 trillion won (about $1.49 billion) in the KOSPI market alone. Foreign investors collapsed the index defense line by recording net selling of approximately 2 trillion won. In particular, they intensively sold over 1 trillion won (about $749.01 million) of SK hynix, a semiconductor bellwether stock, and also sold off more than 530 billion won of Samsung Electronics, cashing out domestic core IT assets on a massive scale. Institutional investors increased downward pressure on the index in step with the fierce selling offensive of foreigners. Institutions also failed to defend the index, showing a massive net selling dominance centered around financial investments and pension funds. On the other hand, individual investors stepped up for massive net buying (low-price buying), absorbing the volume poured out by foreigners and institutions intact, but it was inadequate to single-handedly defend the index’s decline. The buying trend of individuals is analyzed to have been concentrated mainly on large-cap stocks and the semiconductor sector, where the drop was excessive. In the KOSDAQ market as well, institutions and foreigners net sold 222.8 billion won and 27 billion won worth of stocks, respectively, and individuals net bought 248.8 billion won worth of stocks. KOSPI Top Market Capitalization Stocks Record a Plunge at the Level of a ‘Mass Demotion’ The top market capitalization stocks of KOSPI literally recorded a plunge at the level of a ‘mass demotion’. The decline of the top two semiconductor stocks was particularly painful. Samsung Electronics closed trading at 250,500 won, plunging 4.39% compared to the previous trading day. Unable to withstand the bombshell of foreign selling volumes that continued throughout the session, it widened its drop and delivered a massive shock to investors. SK hynix closed at 1,605,000 won, down 4.52% from the previous trading day. The aftermath of foreigners recording over 1 trillion won in net selling in just one day was reflected intact in the stock price. Holding companies and major technology-related affiliates within groups, such as SK Square (-6.29%), also showed a steep plunge of over 6%, and major top market capitalization stocks, such as Samsung Electro-Mechanics (-3.82%) and Hyundai Motor (-1.39%), could not avoid the downward trend. Secondary battery-related stocks such as LG Energy Solution (-0.75%) and Samsung SDI (-1.41%), which had put up a good defense amid the recent index sluggishness on the prospect of expanding energy storage system (ESS) demand, also closed weak on this day. Among the top market capitalization stocks on the KOSDAQ, Leeno Industrial (-11.15%), Simmtech (-10.36%), EcoPro BM (-10.25%), Rainbow Robotics (-8.86%), EcoPro (-8.49%), and Jusung Engineering (-5.42%) declined. Won-Dollar Exchange Rate Closes at 1,335.1 Won, Down 7.7 Won from the Previous Session Coupled with the stock market plunge, a sense of tension also hovered over the foreign exchange market. In the Seoul foreign exchange market on this day, the won/dollar exchange rate received upward pressure as the rise in United States Treasury yields, global dollar strength pressure, and concerns about the reverse remittance of foreign stock selling funds in the domestic stock market acted in combination. The won-dollar exchange rate closed at 1,335.1 won, down 7.7 won based on the closing price of day trading (3:30 PM). The exchange rate on this day dropped to 1,333.2 won during the session, which was the lowest since the low point on Oct. 4, 2024 (1,331.3 won). The won-dollar exchange rate started higher from the beginning of the session and then engaged in a battle near the intraday high. Coupled with the strong tone of the global dollar index, downward pressure on the won intensified, and a dollar buying dominance continued in terms of supply and demand despite the vigilance toward fine-tuning by the foreign exchange authorities. However, the extent of the additional rise appeared to be limited as some high-point dollar selling volumes from exporters flowed in. It was a day where the yen-won arbitrage exchange rate and major arbitrage exchange rates also increased volatility by linking to the movements of global currency pairs. Today, the domestic stock market showed the aspect of a ‘perfect storm’ where external economic variables and supply and demand bad news erupted simultaneously. The massive exodus of foreigners completely ruined the short-term supply and demand of the domestic stock market and left concerns that performance expectations centered on semiconductors could be shaken. Experts diagnose that in order for the stock market to find stability in the future, the direction of United States monetary policy, whether foreign supply and demand calm down, and the recovery trend of semiconductor export indicators must precede. It is a time when conservative portfolio management focused on risk management is required for investors for the time being.