KOSPI Falls Below 7,000, Foreign Selling Continues

Foreign investors, in particular, continued their large-scale selling, amounting to 2.2 trillion won for two consecutive days, increasing market anxiety.

Chinese semiconductor-related stocks fell, and the Nikkei index closed flat, indicating mixed performance in Asian markets. Moreover, upward pressure on interest rates persists, with the U.S. 10-year Treasury yield remaining in the 5.2% range.

This movement coincided with a wait-and-see attitude ahead of Micron's earnings announcement and quarter-end rebalancing.

Micron Technology's earnings announcement, scheduled before the main trading session this Thursday, is expected to be a key variable in the semiconductor market.

In the past, there was a tendency to invest after confirming earnings, but recently, the perception that it's too late after earnings announcements has spread in the market.

With Meta's 'Muse' launch raising expectations for AI popularization, if Micron provides better-than-expected guidance, the market can anticipate a significant rise in AI semiconductor-related stocks.

According to Kim Tae-seong, Department Head, the daily fluctuation range of large-cap stocks like Samsung Electronics and SK Hynix has significantly narrowed compared to May and June.

As a result, individual investors are shifting their attention to small and medium-sized stocks, particularly semiconductor materials, components, and equipment (Sohanjjang) companies, to pursue returns exceeding the market index.

The momentum of Sohanjjang companies, which are expected to see factory expansions and increased utilization rates, is gaining prominence, strengthening investor preference.

When Samsung Electronics reached the 270,000-won to 280,000-won range, not only Samsung Electronics but also semiconductor Sohanjjang stocks, including front-end, back-end, chemical materials, and component companies, all rose in unison.

Sohanjjang stocks are considered a sector with a high probability of outperforming the market index.

Analysis suggests that 'substrate' stocks are the core of the semiconductor Sohanjjang boom and have high investment appeal.

Kim Tae-seong, Department Head, advised that if Samsung Electronics and SK Hynix are likely to rise to their previous highs, it is necessary to partially sell off the increased weighting of 'Electronix' (Samsung Electronics + SK Hynix) in the overall portfolio to realize profits.

He suggested that the funds from the sale should be diversified into domestic semiconductor Sohanjjang stocks, specifically substrates, semiconductor test sockets, or cleanroom-related stocks, rather than other sectors.

He provided reasons for his personal judgment that Samsung Electronics has approximately 20% additional upside potential.

Investments in pharmaceutical and bio companies like HLB require a cautious approach due to reliability issues.

While company reports in the pharmaceutical bio sector may seem like a panacea, it is often difficult to track actual data.

In contrast, the automotive and semiconductor industries allow for transparent tracking and management of company performance through sales data, making investment decisions relatively easier.

Kim Tae-seong, Department Head, suggested that companies like Samsung Biologics, ST Pharm, and Celltrion should have shown relatively stronger performance. This does not imply disrespect for HLB's technology.

These companies are recording record-high revenues and operating profits every quarter, and Celltrion, in particular, has already prepared a strategy to avoid tariffs by acquiring a U.S. production line.

Domestic solar stocks had been held back by China-related variables. However, with increased demand for products like Hanwha Q CELLS, factory utilization rates are rising, and price attractiveness is emerging even amid ongoing Treasury yield impacts.

This analysis suggests new opportunities for domestic solar companies that had previously struggled due to the influence of Chinese companies.

Domestic companies like Hanwha Q CELLS are seeing increased factory utilization rates due to rising product demand, and while renewable energy is also affected by Treasury yields, it has now entered an attractive price range.

Secondary batteries are not showing the expected growth from an electric vehicle (EV) perspective.

The fact that no company clearly calculates the operating profit margin for individual ESS units increases uncertainty.

The low technological barrier for ESS means many companies are entering the market, which is a problematic factor for investment.

Opportunities will open for leveraging secondary battery volatility when large-cap stocks stabilize during a Sohanjjang pause.

It has been observed that when Samsung SDI breaks 550,000 won, major secondary battery material stocks such as EcoPro, POSCO Future M, and L&F rise together.

Samsung SDI's defensive movement today mitigated market shock from the decline of Samsung Electronics (Electronix), and with large-cap stocks like LG Energy Solution providing stability, the potential for increased volatility in the secondary battery sector during a Sohanjjang pause remains.

To prepare for a rotation market in the second half of the year, investors who are in profit should adjust their weighting by realizing some profits.

He emphasized the need for proactive weight adjustment, as individual investors tend to be aggressive in buying but struggle with timing their sales.

Unlike semiconductors, secondary batteries, and solar power, the pharmaceutical and bio sector has numerous unexpected risks, such as capital increases. A strategy of responding when the stock gains momentum and rises, rather than buying and holding, is more appropriate.

Kim Tae-seong, Department Head, advised that for pharmaceutical and bio investments, a strategy of responding when the stock gains momentum and rises is more effective than a stable approach.

Material and component stocks like Simmtech, TLB, Daeduck Electronics, and Korea Circuit have less earnings volatility than equipment stocks, making a holding strategy valid at this point.

Simmtech, TLB, Daeduck Electronics, and Korea Circuit were named as key interest stocks, with a suggestion to approach primarily material and component stocks, which have less earnings volatility than equipment stocks.

The recent weakness in the domestic stock market is merely a result of supply and demand factors, and there is insufficient evidence to conclude that the market's fundamental strength has completely collapsed.

In a rotation market, he is closely watching Hanwha Solutions and OCI Holdings in the renewable energy sector as key stocks.

There is a possibility that the strength of these stocks will shift to energy storage system (ESS) related stocks, and a strategy of chasing stocks that react quickly when the index recovers is effective.