Profit-taking by foreigners limits rebound; KOSDAQ ends in negative territory

After yesterday's sharp drop, a rebound appeared, but at just over 1% the gain is very limited. KOSDAQ fell 0.39% and failed to stage a real rally.

Only a few stocks, including the EcoPro group and Alteogen, rose, while most other stocks remained in the red.

Foreign investors sold 93.1 billion won on KOSPI. On KOSDAQ the selling reached 250 billion won.

Early on they appeared to be buying, but they turned to profit-taking. Over the same period individual investors sold 130 billion won on KOSPI, while institutions bought 85.8 billion won, leaving supply and demand split.

Futures buying was small, under 100 million won.

Compared with the 1,500–1,560 won levels reached in the good stretch of June and July, it is about 220 won lower.

A weaker rate is a signal of improving earnings for export firms such as semiconductor and auto makers. Industries sensitive to the exchange rate, including AP, power equipment and Hyundai Motor, are affected.

Right now, that pattern is nowhere to be seen.

Foreign selling is continuing regardless of the weaker-rate signal, which suggests that taking profit to secure cash is taking priority.

Concern about the industry is growing, to the point that Broadcom's vice chairman compared AI to a 'casino.' Issues around CXMT are adding to market noise.

Hyperscalers' share of the US corporate bond market is currently around 5% but keeps rising. From a credit-spread perspective, risk assessment is still moderate, but it needs monitoring.

Credit risk could expand next year, since excessive capital spending by AI companies and uncertainty over returns could be priced into credit markets.

In this phase of deepening AI investment, a credit-deterioration scenario is becoming a major hedging target for the market.

With the won-dollar rate at 1,339 and the dollar index near 102, the probability of a Fed rate hike next month is judged low, around 20%. Against this backdrop, major investment banks including Goldman Sachs have shifted their bond positioning from neutral to overweight.

BlackRock has likewise unveiled an action plan to cut its equity allocation and raise its bond allocation.

KOSPI trading value has halved, from an average of 40–50 trillion won to about 20 trillion now. Pockets without buyers have formed across the market.

As supply that had concentrated in semiconductors shifted toward Micron and US big tech, domestic market accumulation weakened. Foreign selling of about 160 billion won looks small, but with trading volume thin, its impact on the market is large.

With SK Hynix's share buyback nearing completion, corporate support will also fade. Foreigners continue to take profits, and there is almost no fresh cash investment.

Chairman Lee Kun-hee's inheritance from Hong Lee-hee amounted to roughly 2 trillion won. The division of assets in Chairman Chey Tae-won's divorce is shifting SK's stake, raising concern over a restructuring of ownership.

Foreign activist funds and some owners are pressing Samsung Electronics to cancel treasury shares and review shareholder returns. Foreign investors have started preemptive demands in the form of shareholder letters.

ASML's results are an important indicator, and TSMC is scheduled to report at the end of October.

In the last week of October, Alphabet, Amazon and Intel will report results together. Meta showed a reasonably good share-price move overnight. Market participants, however, are not focusing on financial-sector earnings.

If Democrats win the November 3 US midterm elections, AI could face constraints. Democrats have backed a slower AI rollout and have tended to delay approvals.

Trump can use a veto to block Democratic regulation, but overriding it would require two-thirds of the seats, which may be unrealistic. Trump is more favorable to big tech on regulation, so investors have little choice but to count on his policies.

After the midterms, Trump could also respond more firmly toward Iran.

Some brokers view the 5,600–6,000 won range as a sufficient buying zone. NH Investment & Securities said current levels resemble the July bottom, and recommended a buy-the-dip strategy over a retreat.

Other brokers see sectors with little China exposure, such as secondary batteries and content, as relatively strong, given the possibility that Chinese new technologies materialize. Foreign and institutional supply and demand is moving the market more than individual flows.

SK Hynix has halved from a peak of 3 million won to 1.5 million won. Even a 7–8% rebound from here is small compared with the overall loss.

Foreign ownership of semiconductors has fallen to historically low levels, showing how intense profit-taking has been. Investors are worried about the structural weakness of the semiconductor sector.

Foreign ownership of semiconductors has fallen to the dotted line marking historically low levels. Foreigners, who held close to 50%, keep taking profits.

SK Hynix's share buyback is set to end next Tuesday. After that, SK Hynix trading volume, foreign flows, pension, investment-trust and ETF flows, and the response to the third fund become the market's key focus.

Market participants worry about further foreign selling. Given that buybacks had been propping up the market, concern over more weakness appears justified.

Murata is refusing customer orders for MLCCs. Citing supply issues, it keeps replying that it will accept the next order.

This points to a supply chain in the chip industry that is not functioning smoothly. A supply shortfall of a core component supplier could have a knock-on effect across industries.

A large share of South Korea's semiconductor exports go to China. Jusung Engineering has built trust through its track record of deliveries to China.

The speed at which Jusung's earnings for next year and the year after are rising has won applause in the market. Samsung Electronics, SK Hynix, Chinese chipmakers, Intel and Micron will have no choice but to expand orders with proven materials and parts suppliers.

The Democratic government has substantially tightened the requirements for delisting. Applied to past cases, the current standard would make several hundred KOSDAQ stocks eligible for delisting.

Although the market already knows this, the actual impact could grow as the standard is applied to current cases. It is read as a signal of structural clean-up in the KOSDAQ market.