August 10 Market: KOSDAQ Surges 7% While KOSPI Falls 0.6%… Foreign Flows Drive KOSPI Decline

CEO Lee Gwon-hee commented on this market movement.

"KOSDAQ surged almost 7% today. KOSPI is down about 0.6%."

CEO Lee Gwon-hee stressed that stocks rose across all sectors, with broadening gains continuing. Only institutional investors were net sellers that day, while the market as a whole maintained a positive trend.

"Each individual sector had its tailwinds, and the spread across stocks keeps continuing. Foreign and individual flows poured into KOSDAQ, so only institutions sold today, and all sectors rose evenly."

CEO Lee Gwon-hee analyzed that foreign selling had a major impact on the market, with a pattern very similar to last Friday. Foreign investors kept sell positions in large caps such as Samsung Electronics and SK Hynix, fueling the index decline.

"Negative foreign flows continued to weigh on KOSPI as a negative factor. This showed a pattern very similar to last Friday."

CEO Lee Gwon-hee explained that both stocks posted bearish candles, weighing on the index as a whole. He diagnosed that the trend reversal in both stocks has not been fully completed, suggesting that market attention is spreading to other stocks.

"Samsung Electronics, Hynix, and the index all printed bearish candles for that reason. In August, we haven't had a single bullish candle. The trend reversal in Samsung Electronics and Hynix has not been fully completed."

CEO Lee Gwon-hee explained that they sell futures to induce price declines, press down again when institutional or individual investors start buying, and thus manipulate the market in their favor. Through this strategy, foreign investors maximize gains by buying again once prices fall below a certain level.

"Futures get interesting when they show this kind of pattern. In the dips, institutions keep buying, and then they press Samsung Electronics and Hynix. Even though they pressed it, it doesn't get pressed down, so they throw futures. When they throw futures, prices follow down. Then they pull the prices back up again."

This is interpreted as capital previously concentrated in certain large caps being dispersed and driving gains in other stocks.

"Where we're using the remaining strength is outside Samsung Electronics and Hynix. KOSDAQ and mid-cap stocks, and Korea's KOSPI as well, had a lot of gaining stocks today."

CEO Lee Gwon-hee saw this shift as potentially contributing to the vitality of the KOSDAQ market overall. This is interpreted as a strategy to diversify single-stock risk and capture upside across the KOSDAQ market.

"It seems investors who were in single-stock leverage are moving to KOSDAQ 150 leverage."

Hanmi Semiconductor gained 7%, and major materials/parts/equipment companies such as Eugene Technology, Wonik IPS, PSK, and Test each rose more than 10%. Most materials/parts/equipment stocks recorded gains of 8% to 12%. Hyundai Motor Group stocks also showed a good trend, with most names except Glovis rising more than 3%.

"Hanmi Semiconductor rose another 7%. Eugene Technology, Wonik IPS, PSK, and Test all rose more than 10%. Most materials/parts/equipment stocks rose 8% to 12%. Hyundai Motor Group stocks, except Glovis, also rose more than 3%, showing a good trend."

The power equipment sector drew market attention with strong growth. In particular, Sanil Electric jumped more than 17% on rising order volume and strong earnings. LS Electric, Hyundai Electric, Hyosung Heavy Industries and other power equipment-related stocks also showed good performance. CEO Lee Gwon-hee assessed the sector very positively, noting its operating margin is currently about 35.59%, expected to reach 36.97% next year and 38% over the long term. Institutional investors mainly bought these stocks.

"Power equipment was really good. Sanil Electric rose the most today. There were comments about rising order volumes, the earnings were good, and it rose more than 17%. LS Electric, Hyundai Electric, and Hyosung Heavy Industries were all good too. This group's operating margin is nearly 40%. This year's operating margin is 35.59%, next year 36.97%, and it's heading toward 38%, so it looks very good. Institutions mainly bought here."

However, considering its past peak (1.2 million won), he added that it is hard to tell whether the current rally offers real hope or is merely false hope.

"For the first time in a while, all KOSDAQ sectors rose. Samchundang Pharm, which is not included in ETFs, rose the most, up 27%. Since it has fallen so much from 1.2 million won, I'm not sure whether it's false hope or real hope, but it's rising quite a bit."

CEO Lee Gwon-hee analyzed that more flow release is needed and that shareholder return policies could become an important momentum for the market. He pointed to good results from TSMC and expected Nvidia's strong results to positively affect domestic Hynix as well.

"Market consensus on memory chips is still improving, but the market isn't reacting. Flows are still tangled. I think more flow release is needed. Shareholder return policies could become momentum. TSMC's results look good, and Nvidia's will surely be good too. With Nvidia doing well, there's little reason for Hynix to get worse."

CEO Lee Gwon-hee explained that this is because big tech companies are expected to generate returns above market interest rates (9% to 10%). He analyzed that these companies can raise funds even in a high-rate environment because high investment returns are expected.

"Even with rates this high, the U.S. stock market is hitting record highs. Why? Because they earn more than that rate. Big tech is raising funds at 9% to 10%, but they can raise it because they expect to earn even more."

There is a major difference in how the U.S. and Korean financial systems raise capital. CEO Lee Gwon-hee explained that in the U.S., banks lend less readily to companies, so the corporate bond market is well developed, whereas large Korean companies like Samsung Electronics can borrow easily from banks and thus issue few corporate bonds. He added that in Korea, mainly public corporations issue bonds, as they can raise funds cheaply backed by state guarantees.

"In the U.S., banks don't lend to companies much, so corporate bonds are developed. Samsung Electronics borrows easily from banks, so it doesn't issue corporate bonds. In Korea, mainly public corporations issue bonds. Since they have state guarantees, they can raise funds cheaply, so bonds are more advantageous than bank loans."

CEO Lee Gwon-hee explained that if foreigners push prices down too far, large buy orders could flood in and send prices sharply higher, so they are selling gradually at levels individual investors are willing to buy. This appears aimed at stimulating individual investors' bargain-hunting while avoiding sharp swings in the overall market.

"Foreigners are pressing a bit, but then they buy again. They don't want to push it down further, because they also find valuations burdensome. If they push too far, big buy orders could come in. If bargain buying floods in, prices shoot up. They avoid stimulating that too much. They sell at levels where individuals will buy. When they press sharply, individuals don't buy, so they sell gradually. Small sales keep getting filled by individuals waiting below."

CEO Lee Gwon-hee said this is not normal, but it is a familiar market that has commonly occurred in the past, and some describe it as the market normalizing. He viewed that since Samsung Electronics and Hynix have corrected 30% to 35%, other stocks should rebound to a similar level.

"Samsung Electronics and Hynix moving sideways while the rest move around isn't normal, but it's a familiar market that happened before. Many people describe it as normalizing. The rest fell too much, so some rebound should come. Since Samsung Electronics and Hynix corrected 30% to 35%, the rest should be brought to the 35% level as well."

CEO Lee Gwon-hee noted that some individual stocks have risen more than 70%, stressing that a stock-picking market is unfolding for the first time in a while. In particular, in biotech, large caps such as Olix, Algenomics and DD showed good trends, and he added that Eugene Petasys, CMNTX, Hanmi Semiconductor, Hyosung Heavy Industries and Sanil Electric also looked positive.

"The KOSDAQ 150 is up 30% from the bottom. Some stocks are up more than 70%. For the first time in a while it's a stock-picking market. In biotech, look inside that area. Biotech was all good today. Large caps like Olix, Algenomics and DD did well. Eugene Petasys rose strongly for the first time in a while, and CMNTX also rose strongly. Hanmi Semiconductor and others were all good, and I still view Hyosung Heavy Industries and Sanil Electric favorably."

CEO Lee Gwon-hee named several stocks worth watching across sectors. He viewed shipbuilding stocks and secondary battery stocks (SDI, POSCO Future M, L&F, EcoPro BM) as having entered a trading buy zone with the trend reversal largely complete. He also views Hyundai Motor, Hyundai Mobis, LG Electronics and LIG Nex1 favorably after their correction, and added SK Telecom as a physical AI-related stock.

"Shipbuilding was good, and in secondary batteries SDI led, POSCO Future M went up once, and L&F and EcoPro BM are improving too. All of these are now in a zone where a trading buy is fully feasible. The trend has largely reversed. I view the corrections in Hyundai Motor, Hyundai Mobis, LG Electronics and LIG Nex1 favorably, and for physical AI, adding SK Telecom would be enough."

He appears to have judged these two companies to be positive long-term investments. He specifically mentioned Naver and Hyundai Motor, implying the choice weighs both future growth and stability.

"I'd just want to buy Naver for my daughter. Hyundai Motor and Naver."

Regarding KOSDAQ policy issues, a guideline announcement is scheduled for early September. CEO Lee Gwon-hee said the so-called 'stock price protection act' discussion is also not clear at present, and expects that a new government proposal will be drafted after re-discussion. He took a critical stance on the current government proposal.

"I don't know how the KOSDAQ policy issue is progressing. There's a lot of talk, but the guidelines are due to be announced on September 1. They say it's early September. The stock price protection act, the so-called anti-pressing act, is also not clear. It will be re-discussed, and then a new government plan will be drafted. The current government plan looks like something a grade schooler made."

CEO Lee Gwon-hee forecast that the domestic stock market will move sluggishly this week. He viewed that if the market rebounds, foreign investors are likely to press it down again. He said it is encouraging that Samsung Electronics and SK Hynix have turned positive in after-hours trading, but stressed that it remains to be seen when foreign selling worth several trillion won will be cleared.

"Today, luckily, Samsung Electronics and Hynix turned positive in after-hours trading. It feels good when things end in the green. Anyway, this week we should expect sluggishness like this. If it rises, it's likely to be pressed again. First, we need to see when foreign selling of several trillion won finishes clearing."