"KOSPI Is Undervalued, but There Is No Clear Buyer"

Samsung Securities Report: "Reasons Behind the Market Decline and Response Strategies"

On the 28th, an employee was working in the dealing room at the Seoul Hana Bank headquarters. On this day, the KOSPI closed at 6,023.66, down 732.09 points (10.84%) from the previous day, and the KOSDAQ index ended at 705.85, down 59.01 points (7.72%). Yonhap News

Although the KOSPI is currently in a technically oversold phase and valuations are in a historically undervalued range, experts have noted that the lack of a clear buying entity is acting as a constraint on a rebound.

According to Samsung Securities' report "Background of Stock Market Decline and Response Strategies" released on July 29, the previous day's sharp decline in the KOSPI was triggered by concerns in the credit market over China's semiconductor self-sufficiency and investments in artificial intelligence (AI), which combined to dampen investor sentiment.

Samsung Securities explained that reports of Chinese semiconductor equipment companies potentially mass-producing DUV (deep ultraviolet) lithography equipment fueled fears about the accelerated pace of China’s push for semiconductor self-sufficiency. As a result, ASML, a leading semiconductor equipment manufacturer, saw its stock price plummet, while the global semiconductor sector as a whole experienced weakness.

Concerns about the financial health and circular trading of AI companies also became a contentious issue. Credit default swap (CDS) premiums for major AI firms such as Oracle, Alphabet, Amazon, and Nvidia all surged, reflecting the credit market’s growing wariness toward the cash flow burdens imposed by large-scale AI investments. In addition, Nvidia’s announcement of a major deal reignited debate over “AI circular trading.”

Risk-averse sentiment also increased ahead of key events. The upcoming earnings announcements from major domestic and global big tech firms, alongside the July FOMC meeting, led to heightened uncertainty about monetary policy, prompting investors to dump risky assets.

Despite a flood of panic-driven selling during the market rout, there were no substantial buyers to absorb the supply. The balance of investment deposits in the stock market dropped sharply from about 140 trillion won on June 4 to approximately 106 trillion won as of July 24. Samsung Securities analyzed that, as retail investors initially absorbed most of the foreign selling at the start of this downturn, their capacity for further buying is likely limited. Furthermore, amid severe market volatility, the return of both foreign and institutional investments remains highly uncertain.

Jo Ain, a researcher at Samsung Securities, stated, "This adjustment appears to be driven not by deteriorating fundamentals, but by a combination of uncertainties and a constrained liquidity environment, which have weakened investor sentiment." Jo recommended, "In the short term, it is advisable to avoid frequent position changes and to respond gradually while monitoring key events." Jo also added, "From a long-term perspective, a selective approach focused on industries with a verified competitive edge in semiconductors and those showing clear signs of earnings improvement is effective."

This content was produced with the assistance of AI translation services.