[Closing Market] KOSPI Clings to 6,000 Amid Foreigners' Heavy Selling

On the afternoon of Oct. 13, the KOSPI indexand stock prices of Samsung Electronics and SK hyix are displayed on the electronic board at the dealing room of Hana Bank headquarters in Jung-gu, Seoul. (Yonhap) On Oct. 13, the domestic stock market faced a fierce selling offensive from foreign investors, staging a record-breaking plunge. As a massive volume of stocks flooded the market following the previous day, the KOSPI index instantly collapsed by more than 5%, facing a precarious market finale that threatened the 6,000 support level. The overall market appears to be severely frozen as anxiety surrounding global semiconductor industry conditions overlapped with the emergence of selling volume during the process of resolving the supply-demand concentration. On this day, the KOSPI index closed at 6,035.35, plummeting by 348.89 points (-5.46%) compared to the previous trading day. The index started at 6,186.08, slightly lower than the previous session, but expanded its losses as a bomb of selling volume from institutions and foreign investors poured in right after the opening. At one point during intraday trading, it was pushed back to the 5,911.11 level, temporarily breaking down the 6,000 level, but as some low-end buying entered near the market close, it barely recovered above the 6,030 level to finish the session. On this day, the KOSPI market capitalization was tallied at 4,986.333 trillion won (about $3.70 trillion). It fell below the 5,000 trillion won mark for the first time in about two and a half months since on July 30. The KOSDAQ index also failed to support its bottom and showed a bearish trend. The KOSDAQ closed at 837.03, down 1.43% from the previous trading day, fully inheriting the shockwave of the KOSPI market. It was a day when investment sentiment was extremely contracted as panic selling centered on large-cap stocks spread throughout small and medium-cap stocks. It is about 32% lower compared to this year’s intraday high for the KOSDAQ (1,229.42 on April 27). Massive Foreign Dumping of More Than 4 Trillion Won and Supply-Demand Imbalance The epicenter of the stock market plunge on this day was undoubtedly the indiscriminate ‘sell’ offensive by foreign investors. Foreign investors led the index decline by net selling trillions of won (approximately 4.5 trillion won or $3.34 billion) worth of stocks in the KOSPI market during this single day alone. The fierce emergence of foreign volume that has continued since late last week is analyzed to be caused by the increased valuation burden of the domestic stock market and global portfolio adjustments. Institutional investors showed limits in defending the index, unable to fully absorb the massive volume of foreigners. They recorded a selling dominance (1.6902 trillion won) centered on Financial Investment and Pension Funds, aggravating the downward pressure on the index. Individual investors took advantage of the plunging index to actively participate in low-end buying, solely recording a massive net buying dominance (2.2271 trillion won). The strong buying trend of the ‘Donghak Ants’ flowed in, trying desperately to defend against the index’s additional drop, but it was inadequate to block the overwhelming volume offensive of foreigners. In the KOSDAQ market, individuals net sold 190.8 billion won. However, foreigners and institutions applied upward pressure on the index with a buying dominance of 139.8 billion won and 42.9 billion won, respectively. Top Market Cap Stocks Including Semiconductor Duo Plummet into Absolute ‘Devastation’ The top market capitalization stocks were literally ‘devastated.’ In particular, large-cap semiconductor stocks, which had served as the driving force for the index, showed a simultaneous plunge and dragged down the entire index. On the news that Chinese memory semiconductor company ChangXin Memory Technologies (CXMT) will release server semiconductors within the year, the stock prices of Samsung Electronics and SK hynix slid by 7.29% and 10.09%, respectively, on this day. Samsung Electronics closed with a significant drop compared to the previous trading day as it became the target of concentrated selling by foreigners and institutions. Amid the recent dilution of the safety net effect from treasury stock repurchases, the stock price was pushed back substantially, taking a direct hit from the aftermath of the global tech stock weakness. The drop in SK hynix was even steeper. SK hynix plummeted to the 1,489,000 won level at one point during intraday trading, and closed falling by 10.09% compared to the previous session . The controversy over the peak of memory semiconductors and concerns about the pursuit by Chinese competitors acted complexly, severely deteriorating investment sentiment. Over the past five trading days, Samsung Electronics and SK hynix fell by 15.94% and 21.66%, respectively, and their market capitalizations shrank by 258 trillion won and 292 trillion won, respectively. A blue light (decline) flashed across all sectors, including automobiles, secondary batteries, and platforms. Most of the large-cap blue-chip stocks positioned in the upper ranks of the market capitalization recorded a decline rate in the 3% to 6% range, plunging investors into deep distress. In the KOSDAQ market, ALTEOGEN (-3.02%), ECOPRO BM (-2.08%), and Rainbow Robotics (-1.92%) were bearish, while JUSUNG Engineering (3.56%), ECOPRO (1.31%), and LEENO Industrial (1.92%) closed higher. Won/Dollar Exchange Rate Rises by 10 Won in Line with Stock Market Plunge In the Seoul Foreign Exchange Market, the won-dollar exchange rate received upward pressure driven by the steep downward trend of the domestic stock market, foreign repatriation demand, and dollar futures buying. The won/dollar exchange rate rose by 10 won in a single day due to foreign dumping in the domestic stock market and macroeconomic bad news. Although the dollar buying volume from semiconductor export companies hit a yearly low during intraday trading, external risks eventually pulled up the upper limit. As of the close at 3:30 p.m. on this day, the won/dollar exchange rate recorded 1,345.1 won, rising by 10.0 won compared to the previous trading day. The won/dollar exchange rate fell to 1,331.2 won in the morning, breaking the yearly low for two consecutive days. This is interpreted as the result of continuous dollar buying demand from semiconductor export companies. The dollar showed strength as the preference for safe assets intensified in tandem with concerns about capital flight by stock market participants. However, the breakthrough of the 1,350 won line appeared to be blocked for now due to vigilance against smoothing operations by foreign exchange authorities. Nevertheless, it was insufficient to withstand the strong dollar pressure fueled by foreign net selling in the stock market, high oil prices, and high interest rates. The yen-won arbitrage exchange rate recorded 845.05 won per 100 yen, and the yuan-won exchange rate closed at 199.84 won, continuing the downward pressure on the won against neighboring currencies. Securities industry experts diagnosed the plunging market conditions of the day, stating, “Despite the real economic indicators or the strong export trend, it is the result of the short-term valuation burden of the global semiconductor sector interlocking with the unilateral departure of foreign supply and demand.” In particular, the wait-and-see sentiment has reached its peak ahead of the announcement of the United States’ September Consumer Price Index (CPI) and the Monetary Policy Board, which will determine the direction of domestic monetary policy. In the short term, the futures trading patterns of foreigners and whether large-cap semiconductor stocks rebound are expected to be the key variables that will determine the safe settlement of the KOSPI 6,000 level. It is a time for market participants to focus on conservative risk management while checking the trends of external economic indicators rather than making unreasonable leverage investments.