Korean Stock Market Diverging from US, Why?

The Korean stock market is declining due to geopolitical risks in the Strait of Hormuz, coupled with large-scale selling by foreigners and supply-demand events like semiconductor ETF rebalancing.

Specifically, as geopolitical risks in the Strait of Hormuz escalated and news broke of an attack on a Saudi oil pipeline, Nasdaq futures plummeted, acting as downward pressure on the Korean market.

Amidst this situation, foreign investors are continuing their large-scale selling, and supply-demand events such as semiconductor ETF rebalancing are also analyzed as negative factors impacting the market.

As the dollar index approaches 100, capital is noticeably flowing into the US market.

With Asian emerging market indices, including Malaysia, showing declines, it is interpreted as a natural phenomenon for foreign investors to withdraw capital from the Korean market.

The divergence between the Taiwanese stock market, centered on TSMC, and the Korean stock market, focused on semiconductors, is becoming pronounced, making Korea a target for global managers reducing their exposure to emerging markets.

This further exacerbates the differentiated decline of the domestic stock market.

In line with the typical supply-demand rotation pattern seen during market downturns, performance-based stocks such as Kolmar Korea, Cosmax, and DongKook Pharmaceutical are showing strength.

Kolmar Korea, Cosmax, and DongKook Pharmaceutical have seen their stock prices rise based on solid earnings.

This phenomenon is a typical supply-demand rotation pattern often observed in past market downturns, showing a tendency for capital to flock to fundamentally strong stocks when market leaders underperform.

The KOSPI closed down 1.98% at 6,803, and the KOSDAQ also fell below 900, ending at 898.

Foreign investors net sold over 3 trillion won, while individuals net bought 3.2 trillion won, indicating a widespread capital outflow from emerging markets.

The news report of an attack on a Saudi state oil facility is also suggested as a potential trigger for the market downturn.

However, experts interpret that the decline is not due to a single negative factor but rather a broader deterioration in investor sentiment.

Samsung Electronics' Q3 earnings, options expiration, ETF rebalancing, and the end of share buybacks coincide. Goldman Sachs warned of increased volatility based on this, but the market largely maintains a skeptical view, considering it a conventional report from foreign research firms.

However, there are criticisms regarding the sensational reporting practices of foreign research firms, and skepticism exists about the impact of already-known market events.

Despite Samsung Electronics' quarterly operating profit projected to reach approximately 100 trillion won, a sentiment has formed in the market that even 100 trillion won would be disappointing.

While this leads to expressions of frustration over Samsung Electronics' current stock price trajectory, the market remains unconvinced, suspecting that the performance is driven by rising unit prices rather than technological prowess.

The consensus for semiconductor earnings has little deviation, leading to low expectations for a surprise.

Analysis suggests that the current earnings structure, relying on price increases rather than new product-driven growth, will struggle to satisfy the market.

Market confidence and positive evaluations are likely to be restored only when volume increases and capex investments are accompanied.

Currently, the semiconductor sector is deemed unlikely to see significant additional upside without a major surprise.

While Micron's new high is expected to be a key trigger for a memory semiconductor rebound, the core reason for SK Hynix's weakness is technical doubts surrounding HBM4 8-layer supply.

Rumors among engineers about heat dissipation and yield issues with HBM4 8-layer products are negatively impacting the stock price.

Ultimately, SK Hynix needs to resolve market doubts about its HBM technology to find momentum for a stock price rebound.

The company has reiterated that nothing has been decided, without outright denying listing plans.

This unclear stance is acting as a burden for investors.

If the stock loses momentum near its previous high or forms an upper wick, it's advisable to reduce exposure immediately, and chasing new high stocks is risky.

A repetitive trading strategy of entering with staggered purchases during pullbacks and reducing exposure when profiting is necessary.

Market corrections always provide buying opportunities, so reducing exposure when prices are high and gradually accumulating when they fall is effective.

The perception has spread in the market that the power equipment sector, like defense stocks, 'has many orders but limited capacity (production capacity) for additional growth,' which is acting as a downward pressure on stock prices.

This is analyzed as a result of accumulated fatigue from Hyundai Electric's continuous rise over four years being reflected in its stock price.

The power demand itself is not poor; rather, it can be seen as a technical correction following the long-term rise of the leading stocks.

This is the result of a large volume of disappointment selling as market expectations for technology transfer were not met.

For investors currently holding this stock, a sell recommendation is being issued.

The stock price movements before and after major events like the Nuri rocket launch success show a typical pattern of theme stocks not backed by earnings.

Such stocks tend to rise based solely on anticipation, and it is considered a principle to realize profits before the event occurs.

As many space companies do not yet generate earnings, selling before news breaks is a prudent strategy.

Foreign selling continues in emerging markets due to the impact of rising global interest rates. In an environment lacking momentum to push the KOSPI to 7,500, foreigners are observing without making additional purchases in the Korean stock market.

The market's bottom will likely be reached only when an environment is created that allows individual investors to actively participate in the market.