The recent stock market plunge was due to unstable supply and demand, not external woes, and it's time to diversify investment portfolios in preparation for the fading of AI momentum.
The recent market plunge occurred without any specific news or economic adverse factors being confirmed. Lee Ji-hwan, an expert, stated, "We haven't yet figured out who those guys were, why they did this, what news caused this spasm, and who the culprit is," revealing the unclear fundamental cause of the plunge. However, only foreign futures selling and the resulting program selling were confirmed.
Around 2 PM, a large-scale sale of over 400 billion won occurred from the financial investment sector. Lee Ji-hwan, an expert, explained, "Since foreigners sold futures, the selling from financial investment is program selling. So, foreign selling and stock selling from the financial investment side poured out." This is analyzed as a result of foreign futures selling triggering mechanical program selling, leading to a decline in the KOSPI index.
After the sharp drop, supply and demand showed signs of recovery at the market close. Lee Ji-hwan, an expert, stated, "Looking at supply and demand after the market closed, as you can see, individuals sold over 1.1 trillion won in KOSPI, while foreigners and institutions turned to buying. This means that the momentarily entered funds have fully recovered." With only individuals selling and foreigners and institutions turning to buying, the market closed with a V-shaped rebound, suggesting that it was not a long-term negative factor.
Lee Ji-hwan, an expert, explained, "What's regrettable is that there are no buying entities to take on this program selling. Since there's no one to absorb program selling, a sudden sharp decline occurs." This leads to a phenomenon where small shocks result in large volatility due to the very weak supply and demand in the market.
Conflicting interpretations emerged regarding the impact of share buybacks on the market. Some argued that when share buybacks occur, funds that offload those shares inevitably arise, providing foreign investors with a pretext for selling. Conversely, Lee Ji-hwan, an expert, stated, "When share buybacks come in, funds that offload those shares inevitably appear. So that story is true, but it's also true that share buybacks currently help maintain some downside rigidity in supply and demand." Thus, both arguments were presented, suggesting that share buybacks have a two-sided effect on the market.
As the recent box range has shrunk, returns from short-term trading are declining. Park Byung-chang, an expert, advised, "Those who have been doing short-term trading might have seen good returns in the past month, but now is the time to slowly pull back." Investors who endured the July low must maintain a mid-to-long-term perspective, and short-term investors should now withdraw from the market.
A hedging strategy using inverse ETFs to manage risk rather than selling held stocks was proposed. Park Byung-chang, an expert, emphasized, "When you see it like that, you put in some inverse. You add a little hedge to endure at times like this." Instead of selling main stocks like Samsung Electronics and Hynix, investors can adjust their inverse proportion when the market is deemed risky to protect the overall portfolio from losses. Setting the July low as a stop-loss point and increasing the inverse proportion to prepare for market decline can be an effective way to deal with market volatility until December. This strategy is especially useful when a general market downturn is anticipated and also helps stabilize investor sentiment.
Since the COVID-19 pandemic, the stock market has been driven by AI momentum, regardless of economic cycles. However, Park Byung-chang, an expert, warned, "If the AI momentum is thought to have largely run its course, then we need to consider a major bear market." If AI momentum fades, there is a possibility of a shift to a major bear market, so it is necessary to prepare by utilizing downward-betting ETFs or reducing stock weighting.
Park Byung-chang, an expert, advised against concentrated investment focused on semiconductors and recommended portfolio diversification. "Semiconductors should be at the center. But while keeping them at the center, reduce their proportion in your account to about a quarter, and for the rest, as I mentioned, cyclical consumer goods or bank stocks when interest rates are rising, those kinds of things," he advised. Accordingly, the proportion of semiconductors should be reduced to about one-quarter of the account, and the proportion of cyclical consumer goods and bank stocks, in preparation for interest rate hikes, should be increased. Furthermore, it is advisable to largely divest from derivative themes like AI-related power and cable stocks. This portfolio adjustment aims to prepare for the uncertainty of AI momentum and flexibly respond to market changes.
The September futures and options expiry date is a time to focus on understanding the next month's contracts rather than volatility. Lee Ji-hwan, an expert, explained, "For futures and options, it's a time to focus on understanding the next month's contracts rather than volatility, so there's no need to be overly afraid of volatility like an options expiry." Since the December contract begins after the futures expiry, it can be seen as an opportunity for accumulation rather than market pessimism.
Lee Ji-hwan, an expert, reassured investors by saying, "You may have many worries today and tomorrow, but considering factors like the US market holiday next week, there might be some downward pressure allowing for accumulation. However, we won't see a sharp drop like in July, compared to what we're worrying about." The current period is deemed not to require excessive concern.
Lee Ji-hwan, an expert, analyzed, "If we look at Solidigm itself, it acquired the NAND and SSD business units, primarily producing for enterprise use, so it doesn't surface much. But even if SK Hynix spins it off, its operating profit is about 1 trillion won, so it won't cause a wobble." He assessed that Solidigm's operating profit of around 1 trillion won, in terms of corporate value, has a negligible impact compared to SK Hynix's overall size, and while executive ethics issues are separate, the impact on fundamentals is limited.
Psychological stability and objective judgment were emphasized as crucial for investors dealing with market volatility. Lee Ji-hwan, an expert, urged, "But if you react to every daily fluctuation, you can't respond effectively. Short-term traders will have their own strategies. Mid-to-long-term investors will find this the most difficult period, but I hope they don't psychologically give up." Reacting to daily stock price fluctuations makes it impossible to respond properly to the market. Mid-to-long-term investors must objectively understand positive indicators and stock positions. If pushed psychologically, they will be dragged by the market, so it is necessary to respond calmly without giving up.
Answers come from the transcript, with the exact spot cited.
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