KOSDAQ Surges 6.97%, KOSPI Rises Too; Credit Balances Hit Post-COVID Low

That day, 1,421 stocks rose on the KOSDAQ market, while only 229 fell.

With all top market-cap stocks rising, not only bio stocks but also IT and semiconductor-related shares posted double-digit gains.

The KOSPI market, by contrast, took a relative breather, but this is seen as having had a bigger effect on KOSDAQ's strength. Investment money that had concentrated in Samsung Electronics and SK Hynix spread out, and on the KOSPI, 699 stocks rose while 180 fell, with rising stocks outnumbering falling ones by more than three to one.

Bank stocks, along with some distribution and financial shares, were weak that day. Conversely, the securities sector, which had led the decline, rebounded sharply, and heavy and chemical industries were generally strong, showing a flow clearly different from the recent market. This suggests money is moving from stable sectors toward those with greater growth potential.

This appears to reflect market expectations that Korea's base rate could be raised two or more additional times, and possibly as many as four. Meanwhile, the won-dollar exchange rate eased slightly from the sharp rise of early the previous morning, trading between 1,408 and 1,418 won, and the won has remained strong against major currencies since late last month. Against the yen it traded at 895 won per 100 yen, and against the euro at 1,640 won, continuing its strong run.

Foreign selling appears concentrated in the electrical and electronics sector. On the KOSDAQ, by contrast, foreigners bought about 100 billion won, while individual investors sold roughly 600 to 700 billion won, taking profits as the market rose.

Looking at credit balances, exchange-listed margin loans fell from the 30 trillion won range to the 20 trillion won range, while KOSDAQ margin loans dropped sharply from the 10 trillion won range to the 5 trillion won range. Combined, the two markets fell by nearly 15 trillion won, bringing total credit balances from about 40 trillion won to about 25 trillion won. In particular, KOSDAQ credit balances recorded their lowest level since the COVID-19 pandemic. This is low enough to compare with the level of 3 to 5 trillion won seen when COVID first broke out.

Such a sharp drop in credit balances strongly suggests that the market is now driven more by investor sentiment than by valuation. In other words, analysts argue that investors' psychological state has become the key factor determining market direction. The trend on the KOSDAQ since July in particular shows that these psychological factors are becoming more prominent.

It was stressed that to invest successfully in such a period, it is important to deepen one's understanding of investor psychology, for example by reading André Kostolany's classic 'Die Börse ist eine Psychologie' (The Stock Market Is a Psychology Game).

This is read as a loss of confidence in the domestic market or a move overseas in search of higher returns.

Until last year, individual investors were actively investing in the US market, but from around May, when the Stock Angle TV channel described it as burdensome, they began selling US stocks and returning to the Korean market. At the time, the US market was sound but somewhat expensive, while the Korean market had become very cheap.

However, reports that money has been flowing back overseas since July show an intriguing pattern. Surprisingly, investors tend to pay attention when stocks are expensive and lose interest when they are cheap. It was emphasized that unless this mindset is broken, it will be hard to achieve good results in stock investing. The public's psychology, which runs counter to the basic principle of buying cheap stocks, is strongly influencing investment decisions now.

TSMC publishes its results every month, and its July results have now been released. July revenue rose 44.7% from a year earlier and grew 5.6% from the previous month, showing steady growth. This looked different from the stability of memory chips and gave the market a positive signal.

Breaking down TSMC's annual growth rate by month, one can see that 2026 sits at a level one step higher than before. The revenue chart likewise shows a clearly different level from the past. This improvement at TSMC is analyzed as having been directly driven by the AI narrative, that is, rising demand tied to advances in artificial intelligence.

Nvidia's next-generation architecture, Vera Rubin, is set to launch in earnest. With the Vera Rubin launch, the unit price of high-bandwidth memory (HBM) is expected to rise another step. Even selling DRAM yields a 70% margin, and since HBM is processed DRAM that is much harder to make, expectations are high that its margin will be higher still. Accordingly, SK Hynix's margins are expected to rise in the third and fourth quarters of this year.

This means more than 60% of the Vera Rubin chip's cost goes to high-bandwidth memory, showing how overwhelmingly important HBM is in next-generation AI chips.

The explanation is that the problem is not that HBM is too expensive, but that supply is currently short, making it hard to secure the needed volume. Reports also suggest a plan to attach 1 terabyte (TB) of capacity may be cut in half, which could intensify the HBM shortage.

This is interpreted as meaning Vera Rubin delivers high speed and top performance, suiting a market where current performance can translate into high prices. It was also stressed that HBM is the key component raising Vera Rubin's performance to the top tier.

This suggests that the rise in memory prices could significantly affect the prices of final consumer goods, not just the chip industry.

Well-known private credit funds such as RS, Blackstone, Blue Owl, and Golub are experiencing this. The cause is analyzed as defaults emerging in loans to software companies, which account for more than 20% of these funds' lending.

JP Morgan cut its target price for Kioxia from 155,000 won to 130,000 won. Interestingly, it did not lower its operating profit forecast and in fact raised it. The target price cut is attributed to lowering the P valuation multiple from 11 times to 9 times, so the basic profitability outlook was maintained while only the market valuation multiple was adjusted.

Since last week, the leading stocks on the KOSDAQ have begun to change. Because the market is now a 'sentiment-dominated market' where psychology sits at the very top of all factors, it is important to read the public's contrarian sentiment. Asked when chip stocks will rise again, one analysis said they will rise when investors 'give up'.

The explanation is that chips have no problem in earnings or other fundamentals, and the key lies in investor sentiment. A 'giving up' is already beginning in the psychology of individual investors leaving for the US; although it is unknown when a full capitulation will come, the chip-related market is expected to improve once it does. Accordingly, patience was advised for chip investors at this time.