[Market ING] KOSPI Falls Below 6,000, Seeks Direction for Now

Weekly KOSPI range forecast: 5,100-6,100

Last week, the KOSPI plunged and retreated to the 5,600 level, with a “Black Thursday” unfolding as sidecars and circuit breakers were triggered simultaneously. With the market expected to search for direction for the time being, a series of corporate earnings announcements is expected to bring a stock-by-stock market.

Yonhap News Agency

Last week, the KOSPI fell 14.46% and the KOSDAQ fell 10.93%. On the 16th, the KOSPI rebounded for the first time in eight trading days, but the gains were not enough to recoup its earlier losses. It was a week of steep declines, with the index falling more than 7% on the 15th and more than 5% on the 13th. Lee Kyung-min, a researcher at Daishin Securities, said, “Three external shocks—the U.S. inflation shock, concerns over the profitability and financing of artificial intelligence (AI), and worries about competition in the memory chip market—all converged on semiconductors. The KOSPI, whose semiconductor weighting is overwhelming and whose supply-and-demand safety net has disappeared, fell below the 6,000 level.” He added that its forward price-to-earnings ratio had reached the low 4s, setting a new historic low.

Kim Jong-min, a researcher at Samsung Securities, also said, “Since October, the KOSPI has plunged 20%, a loss approaching the 22% decline recorded last July, when volatility reached an unprecedented level.” He attributed the sharp drop to a combination of three major adverse factors: “First, U.S. inflation data came in above expectations, heightening macroeconomic concerns. Second, noise emerged within the AI ecosystem, including concerns about competition in memory chip supply from China’s ChangXin Memory Technologies (CXMT), risks surrounding CoreWeave’s investment financing, and disappointment with Anthropic’s results. Third, as demand for safe-haven assets strengthened sharply, a correction spread across the entire AI value chain that had led the rally.”

In particular, a supply-and-demand vacuum, including continued foreign selling, is making a stock market rebound difficult. Foreign investors recorded net sales of KRW 13.3188 trillion on the KOSPI market last week. Even on the 16th, when the KOSPI rebounded, they recorded net purchases of just KRW 341.5 billion. “In the Korean stock market, foreign selling is concentrated in large-cap semiconductor stocks among the top companies by market capitalization, while domestic retail and institutional investors lack the buying capacity to absorb the shares,” Kim said. “As the supply-and-demand vacuum deepens following the disappearance of buyers, the market has entered a panic-selling phase.” He added, “A sharp V-shaped rebound in the short term is unlikely, but at this point, when the worst adverse factors have already been substantially priced in, there is little to gain by leaving the market out of fear. A strategy of entering the market in stages after confirming the formation of a firm support level is effective.”

Some analysts say that restoring market normalcy will require a recovery in supply and demand and stabilization of AI-related credit risks. “A technical rebound has begun, but a recovery in the trend will require a sustained easing of foreign selling pressure and buying demand to absorb it, stabilization of AI-related credit risks, and confirmation that earnings forecasts for 2027–2028 remain intact,” said researcher Lee Jae-won.

With the market expected to search for direction for the time being, some analysts say investors should increase their exposure to semiconductor stocks, which have recently plunged. “Given geopolitical risks and the U.S. midterm election schedule, we believe the market needs time to find direction,” said Lee Sang-jun, a researcher at NH Investment & Securities. “From a portfolio perspective, investors should increase their exposure to semiconductors, which were at the center of this decline. If it becomes clear that the CoreWeave situation is an issue involving an individual company rather than the entire AI industry, semiconductors could lead a strong rebound.” NH Investment & Securities forecast a KOSPI range of 5,100–6,100 for this week.

With earnings announcements scheduled this week from U.S. and domestic companies, including Tesla, analysts expect a market driven by individual stocks to continue. “Earnings announcements from major domestic and overseas companies, including Hyundai Rotem, Meta, and Tesla, are scheduled, and company-specific catalysts are expected to come into focus as earnings season gets underway in earnest,” said Lim Jeong-eun, a researcher at KB Securities.

Key events this week include the release on the 19th of China’s third-quarter gross domestic product (GDP) and September retail sales, industrial production, and fixed-asset investment figures. The Bank of Korea’s Monetary Policy Board will meet on the 22nd, when the U.S. Conference Board’s September Leading Economic Index will also be released. On the 23rd, the U.S. S&P Global October purchasing managers’ indexes (PMIs) for manufacturing and services are scheduled for release.

Corporate earnings announcements will also continue. In the United States, Netflix and General Motors are scheduled to report results on the 20th; Meta, Tesla, Lam Research, Texas Instruments, AT&T, and IBM on the 21st; and Procter & Gamble, Union Pacific, and Western Digital on the 22nd. In South Korea, Hyundai Rotem is scheduled to report third-quarter results on the 19th, Samsung Biologics on the 21st, and LG Display on the 22nd.

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