6 Trillion Won Moves to U.S. Stocks as Yield Surge and Middle East Risk Heighten Korean Market Unease

The KOSPI is currently seen as holding a key support zone around the 6,800 level, and the market's direction can be judged against that line. If it rises toward the resistance area, analysts see room for a move to somewhere between the mid-7,300s and about 7,500.

Since the stock market fell in July, the pattern of attempted rebounds followed by renewed declines has pushed investor fatigue to a peak. Just when the market seems to turn, it gets pressed down again, weakening investor sentiment. It gives the impression that whenever investors become hopeful, the market pushes them back down.

This suggests investors are giving up on expectations for the Korean market amid its weakness and uncertainty and turning their attention overseas. Many investors have voiced dissatisfaction with Korean stocks, and the shift toward overseas markets, especially the U.S., has become pronounced.

For example, investment is active in triple-leveraged semiconductor index products and SK Hynix ADRs, which pursue high risk and high returns. This is read as reflecting both dissatisfaction with Korean market returns and investors' desire for quick, high gains.

Yields have risen steadily since 2023 and have seldom fallen below 4%, so the high-rate trend persists. Rising Treasury yields reduce the appeal of stocks, raise companies' borrowing costs, and weigh negatively on overall investor sentiment. In particular, rising long-term yields add to anxiety about the economic outlook.

The U.S. economy is currently showing very solid momentum, driven by expanding investment in AI and data centers. Such investment activates overall economic activity, including rising labor costs, and is a key reason inflation is slow to fall. As a result, U.S. inflation shows structural stickiness due to AI-related investment, suggesting high interest rates could persist for a long time.

In particular, the sharper rise in long-dated Treasury yields, such as the 30-year, is being read as a warning sign. Solid corporate earnings are ultimately what can overcome macro pressure from rising rates, but if high rate levels persist, anxiety across the market is bound to grow.

Signs are emerging that the Middle East conflict may drag on, heightening anxiety about the global economy. The prevailing view is that the war will not end quickly, since efforts to force Iran to yield through economic pressure have shown little effect. This situation is deepening volatility in international oil prices and adding uncertainty across energy markets.

Tensions in the Middle East are rising as Iran, together with Oman, moves to collect transit fees around the Strait of Hormuz. Oman is a U.S. ally, yet this toll dispute further complicates the regional situation. It threatens the stability of the Strait of Hormuz, a core artery for energy shipments, and could pose a potential risk to international oil and logistics markets.

Recent foreign flows show two contrasting trends. Active buying is clearly visible in the semiconductor sector, centered on Samsung Electronics and SK Hynix, and in leading Korean blue chips. This reflects positive outlooks from foreign investors on specific stocks and sectors. At the same time, passive funds are still under selling pressure, suggesting trust in the Korean market as a whole has not fully recovered.

Foreign active funds are selectively buying key names such as Samsung Electronics and Hynix, backed by expectations for a chip-industry recovery and expanding AI-related investment. They tend to focus on the structural changes and growth potential of the Korean market and take a long-term view.

The selling by passive funds, however, appears to reflect reduced exposure or a wait-and-see stance toward the Korean market as a whole. Persistent macro uncertainty, including high rates, high oil prices, and geopolitical risk, has led them to assign lower appeal to the market broadly. This clash between active buying and passive selling makes the market's direction harder to predict.

In particular, as of the recording date, the market's pullback from a peak near 7,200 was driven by stock futures selling. This is one of the main reasons for the index's limited upside, and it is also weighing negatively on investor sentiment.

Foreign investors have taken large short positions in stock futures, revealing negative sentiment about the market. This selling is weighing on overall market mood.

Institutional investors, especially pension funds, have shown a slowdown in stock buying compared with the past. This can be read as a move to avoid current market uncertainty, given pension funds' emphasis on stable returns. As a result, with neither foreign nor institutional investors taking aggressive long positions, the supply-demand imbalance across the market is deepening.

The Korean stock market has traditionally tended to weaken from late summer through the early autumn around the Chuseok holiday. This period is seen as vulnerable until winter arrives. The same seasonal pattern generally appears in U.S. stocks, and strong rallies are rare during this stretch. Investors need to account for this seasonality by adjusting portfolios or taking a cautious approach.

In U.S. midterm election years, stock prices often dip temporarily before the vote. However, there is a statistic that investing during this adjustment period has a 91% probability of stock prices rising until the following summer. After the midterms end, political uncertainty tends to clear and the market gradually settles. Therefore, the temporary pre-election decline can be a buying opportunity from a long-term perspective.

The market is currently in a situation where investors find it hard to act with confidence because of uncertainty in the macro environment. In such periods, it is important to confirm key support levels and respond accordingly. The market currently regards the area around the 2,600 level as the core support zone. If this support holds, a sharp market decline may be limited, but a break below it could increase further downside pressure, so close monitoring is necessary.

This is expected to provide useful information to investors seeking opportunities within the changing technology landscape.