[Morning Market] KOSPI Threatens 5,300 Level Amid Tech Selloff

On Oct. 23, the won/dollar exchange rate, KOSPI, and KOSDAQ indexes are displayed on the dealing room board at Hana Bank’s headquarters in Jung-gu, Seoul. (Yonhap) On the morning of Oct. 23, the domestic stock market is starting and developing with a steep decline in both major markets, taking a direct hit from the fierce downward pressure of the U.S. tech and semiconductor sectors. The aftermath of major big tech and semiconductor-related stock prices undergoing corrections in the New York stock market overnight is immediately projected onto domestic large-cap export stocks, rapidly freezing investor sentiment. The KOSPI index started at 5,403.17, down 2.4% on this day, and retreated to 5,305.98 (-4.12%) in just 10 minutes. The KOSPI, which recently seemed to be consolidating its bottom near the 5,500 level, lowered its low point to the 5,300 level on this day. Although it recovered some of its losses afterward, it is still fluctuating near the 5,400 level, showing a drop rate in the 2% range as of 11:00 a.m. The KOSDAQ index started at 748.32, down 15.78 points (2.07%), and dropped 4.09% to the 730 level before partially recovering the decline. Pushed by the simultaneous selling offensive of foreign and institutional investors, the KOSDAQ market also recorded a steep drop of over 2% at the opening and continues its weak trend throughout the morning. While the won-dollar exchange rate in the Seoul foreign exchange market is increasing volatility in tandem with the global dollar trend, the domestic stock market as of 11:00 a.m. is seeing the selling volume of foreign and institutional investors strongly dragging down the indices. Foreign Investors’ Fierce Selling Offensive Increases Overall Downward Pressure  The KOSPI started significantly below the baseline, dropping sharply compared to the previous trading day. From the beginning of the market, the fierce selling offensive by foreign investors increased the downward pressure on the index. Foreign investors are leading the index decline by showing a selling dominance of over approximately 280 billion won (about $211.2 million) in the KOSPI market on a cumulative basis in the early and mid-morning sessions. It appears that the foreign supply and demand, which had previously raised expectations with the intermittent inflow of bargain hunting, has returned to a ‘sell’ stance in just one day. Institutional investors are showing a mixed trend, alternating between a buying dominance and selling in the early stages, but their defensive power has weakened in connection with the overall program selling volume. Based on early tallies, they are recording sales in the tens of billions of won or showing marginal fluctuations, appearing to struggle to defend the index. Individual investors are pouring in large amounts of low-price buying alone, as if defending against the fierce dumping of volume by foreigners and institutions. As of 11:00 a.m., individuals are recording a massive net buying amount exceeding 200 billion won in the KOSPI market, attempting to act as a buttress to support the downside of the index, but it is insufficient to completely reverse the drop. In the KOSDAQ market, foreigners and institutions are net selling 53 billion won and 41 billion won respectively, while individuals have a buying dominance of 95 billion won. Top Large-cap Stocks Show Intraday Weakness, Largely Turning on Blue Lights  Top large-cap stocks by market capitalization are largely turning on blue lights (falling) and failing to escape intraday weakness. In particular, the fact that the index plummeted despite favorable news from SK hynix adds to the disappointment. Before the opening, SK hynix announced that it was withdrawing the U.S. listing plan for its subsidiary Solidigm, which led to some expectations that the index could avoid a plunge on this day. Due to the characteristic of the domestic market being centered on semiconductors, it is more vulnerable to AI credit anxiety, which creates an atmosphere where further declines could not be avoided on this day. The KOSPI previously closed down more than 3%, reflecting concerns over Meta’s financing on the previous day. Samsung Electronics continues its weak trend due to the aftermath of the global semiconductor stock weakness on the previous day and the simultaneous dumping of volume by foreigners and institutions. As of 11:00 a.m., it is engaging in a tug-of-war near or below the 210,000 won level, recording a drop rate of around 3% to 4% compared to the previous trading day, and leading the market cap-weighted decline of the entire index. SK hynix is failing to avoid a downward trend due to concerns over the peak-out of High Bandwidth Memory (HBM), which has led the artificial intelligence (AI) rally, and the aftermath of the US semiconductor index correction. SK hynix is relatively holding up well, falling 0.3%, but it appears insufficient to change the direction of the index. It is trading near the 1.22 million won level during the session, repeating a pattern of an additional drop of around 0.25% or slight weakness compared to the previous day. The electrical and electronic as well as automobile sectors are generally sluggish. Large-cap stocks related to secondary batteries, such as LG Energy Solution, are also undergoing simultaneous corrections, and some component stocks, such as Samsung Electro-Mechanics, are showing a steep plunge exceeding 6%, further shrinking investor sentiment and increasing the drop of top market cap ranks. Looking specifically, among the top KOSPI stocks, Samsung Biologics (6.32%) is rising significantly, and SK Square (0.27%) is also showing slight strength. LG Energy Solution (-1.41%), Samsung Electro-Mechanics (-2.97%), Hyundai Motor (-3.48%), KB Financial Group (-3.79%), and Samsung C&T (-0.87%) are weak. In the KOSDAQ market, top market cap stocks, including representative secondary battery stocks like EcoPro BM and EcoPro, as well as large-cap pharmaceutical and bio stocks like Alteogen and HLB, are also showing a sluggish trend, mostly dropping from 2% up to over 4% due to foreigners’ profit-taking volume and shrinking risk appetite. EcoPro (-4.21%), EcoPro BM (-5.09%), Jusung Engineering (-4.07%), Rainbow Robotics (-3.49%), and EO Technics (-3.66%) are falling. The Won/Dollar Exchange Rate Opens at 1325.7 Won, Down 0.8 Won from the Previous Trading Day As the stock market shows a rapid downward trend, the pressure for won weakness within the foreign exchange market is also heightening. As the rebound of the dollar index (DXY) in the global market, the strengthening of the preference for safe assets, and the supply and demand factor of foreign funds departing from the domestic stock market intertwine, the exchange rate is receiving strong upward pressure (depreciation of the won) compared to the previous day. At 9:00 a.m. on this day in the Seoul foreign exchange market, the won/dollar exchange rate is trading at 1325.7 won, down 0.8 won from the previous trading day. Although the vigilance over the authorities’ fine-tuning of funds is partially supporting the upper end, it is meshing with the foreign selling trend in the stock market to show a pattern of expanding volatility in exchange rate hikes, acting as a factor stimulating concerns over import prices and further foreign departure. Stock market experts diagnose that the steep plunge on this day has a strong nature of a ‘psychological synchronization phenomenon caused by the short-term correction of US tech stocks’ rather than being a structural negative factor. However, they advise that one must be mindful of the possibility of volatility expanding even in the afternoon session, as foreign passive funds are departing in large numbers for profit-taking and risk management in the short term, and the domestic market’s own supply and demand momentum has become somewhat vulnerable. A securities company researcher suggested, “This is a phase where vigilant selling volume is being pre-reflected ahead of the U.S. big tech earnings announcement season,” and added, “If the index excessively increases its drop, individuals’ low-price buying will flow in, but defensive portfolio management is necessary until the direction of foreigners’ futures and spot supply and demand completely turns around.”