KOSPI Rises for First Time in Six Trading Days... "Q3 Earnings and Shareholder Returns Are Key"

Rising Interest Rates and Increased Supply from China Remain Concerns
The 5,500 Level Recorded in Late July Could Be a Short-Term Floor

An electronic board in the dealing room at Hana Bank's headquarters in Jung-gu, Seoul, on the 14th, as the KOSPI, which plunged the previous day, opened nearly 1% higher. Yonhap News

The KOSPI, which had plunged about 10% this month and fallen below the 6,000 level intraday, reversed course and rose for the first time in six trading days. The rebound is seen as driven by bargain hunting in semiconductor stocks, including Samsung Electronics and SK hynix, amid a perception that the market had fallen too far relative to earnings. Analysts viewed the 5,500-point range, the previous low recorded in late July, as a potential floor against further declines. They expect bargain hunters to enter and the index to attempt a rebound if it falls toward that level.

KOSPI Rebounds After Six Trading Days of Losses Fueled by Fears of a Semiconductor Peak

On October 14, the KOSPI opened at 6,062.08, up 0.44% from the previous trading day, and extended its gains to 1.40%, or 6,120.01, as of 10 a.m. The index had fallen for five consecutive trading days from October 6 through the previous day, but rebounded on October 14. The KOSDAQ was trading at 837.87, up 0.10%.

On October 13, the KOSPI fell as low as 5,911 points after dropping below 6,000 intraday, but managed to hold above 6,000 as individual investors bought shares late in the session. The market plunged amid persistent high oil prices and interest rates, as concerns about a peak in the semiconductor cycle also came to the fore. In particular, concerns about an oversupply of memory chips rattled the market after Chinese memory chipmaker ChangXin Memory Technologies (CXMT) announced the development of next-generation DRAM on October 13. “Concerns about China catching up in semiconductor technology and expanding supply are fueling negative arguments, such as fears that the margins and market shares of the three major memory semiconductor companies will shrink in 2027 and 2028,” said Han Ji-young, a researcher at Kiwoom Securities. “Growing uncertainty about future earnings has weakened investor sentiment toward semiconductor stocks.”

On October 14, however, bargain hunting, particularly in semiconductor stocks, was helping lift the index. As of 9:42 a.m., Samsung Electronics was trading at 239,500 won, up 3.23% from the previous trading day, while SK hynix was up 2.63% at 1,481,000 won. SK Square (2.80%), Samsung Electro-Mechanics (2.71%), LG Energy Solution (2.93%) and Hyundai Motor (1.43%) were also higher.

While all three major U.S. stock indexes fell overnight, the Korean market is seen as having risen on bargain hunting. The Dow Jones Industrial Average fell 0.35% from the previous session, while the S&P 500 and Nasdaq Composite declined 0.02% and 0.15%, respectively. Memory semiconductor-related stocks, including Micron (-3.62%), SK hynix ADR (-3.19%) and Western Digital (-1.61%), fell, sending the Philadelphia Semiconductor Index down 0.23%.

Foreign investors’ sustained net selling of KOSPI shares this year remains a drag on the market. According to the Korea Exchange, foreign investors had net sold KRW 203 trillion worth of KOSPI shares as of October 13. Individual investors and institutions responded with net purchases of KRW 100 trillion and KRW 38 trillion, respectively, but those purchases were not enough to prevent the index from falling. Analysts say foreigners’ continued net selling of Korean stocks is driven less by concerns about corporate fundamentals than by profit-taking, as the Korean market has risen more than other markets this year. Foreign investors were also net sellers of about KRW 50.7 billion worth of KOSPI shares as of 10:02 a.m. on October 14, marking their seventh consecutive trading day of net selling since October 2.

“Foreign investors tend to move around big themes. They have taken substantial profits in semiconductors, and the rebalancing process should be seen as still underway,” said Lee Jin-woo, head of the research center at Meritz Securities. “Meanwhile, buying has been limited because signals that the semiconductor cycle will strengthen from 2027 onward have been lacking.”

The 5,500 Level Recorded in Late July Could Be a Short-Term Floor

Analysts viewed the KOSPI’s short-term floor as being around 5,500 points, the level recorded during the index’s sharp drop in late July. At the time, the index plunged to around 5,500, prompting strong bargain hunting. Analysts say a similar pattern could emerge if the market falls sharply again. Some also believe the floor could be higher this time, as earnings forecasts for Korean companies have actually risen since July.

“Based on the intraday low of 5,911 points on October 13, the KOSPI’s price-to-book ratio (PBR) stood at 1.15 times, its lowest level of the year,” said Lee Jae-man, head of the Global Investment Analysis Department at Hana Securities. “Considering that the KOSPI’s 12-month forward return on equity (ROE) is very high at 28%, the recent plunge appears excessive, and the likelihood of the index falling below its previous low of 5,593 points is low.”

“Market volatility has increased amid persistently high oil prices and interest rates, as well as the possibility of CXMT catching up technologically,” said Kim Byung-yeon, head of investment strategy at NH Investment & Securities. “With supply and demand also worsening because of foreign investors’ net selling and the weakening impact of share buybacks by Samsung Electronics and SK hynix, a test of support at the July low of 5,593 points has become a key market focus.” Kim added, “Bargain buying could emerge at deep-value levels below 6,000 points. The market may stabilize somewhat if third-quarter earnings reports bring favorable outlooks and announcements of additional measures to enhance shareholder value.”

Daishin Securities set the lower end of the KOSPI’s first support range at 5,800, corresponding to a forward price-to-earnings ratio (PER) of about 4.46 times. Its rationale was that the market rebounded in July after the KOSPI’s PER fell to around 4.46 times. “The market is currently testing its first support level,” said Lee Kyung-min, a researcher at Daishin Securities. “If the index falls below 5,800, bargain hunting is likely to emerge around 5,600, the second support level.”

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