- The Korea Composite Stock Price Index plunged nearly 5% during Tuesday's session due to a sharp decline in major chip manufacturers. Although Samsung Electronics' preliminary operating profit for the second quarter soared 18 times year-on-year, excessive market expectations triggered profit-taking and raised widespread concerns among investors about the sustainability of AI-driven earnings.
- Foreign investors sold off more than 1.5 trillion won in the Korean stock market, putting pressure on blue-chip stocks, with the automotive and battery sectors also experiencing significant declines. Battery giant LG Energy Solution, anticipating a sharp drop in profits due to weak demand for electric vehicles, further dented market confidence in the tech and manufacturing supply chain.
- Rising risk aversion prompted overseas funds to flow into the bond market, with yields on Korea's three-year and ten-year government bonds falling in tandem. Despite the stock market experiencing a sharp valuation correction and temporarily triggering a trading halt mechanism, the Korean won recorded a slight gain against the US dollar at settlement.
Positive Earnings Fail to Meet High Expectations as Chip Giants Plunge, Raising Concerns Over Earnings Sustainability
Samsung Electronics (005930) reported preliminary results showing a 18-fold year-on-year surge in second-quarter operating profit, yet its stock price still plummeted 6.84%. Market analysts pointed out that the previously high pricing had already exhausted the positive expectations, leading investors to take profits after the good news was realized. Meanwhile, SK Hynix (000660) also fell 5.29%, reflecting institutional investors' temporary doubts about the long-term growth potential driven by artificial intelligence amid the current high valuation environment, with the sector facing pressure from profit-taking.
Valuation Correction Triggers Circuit Breaker as Massive Foreign Outflows Intensify Pressure on Blue-Chip Stocks
The Korea Composite Stock Price Index (KOSPI) plunged 4.82% during the session to 7,662.93 points, triggering a trading halt mechanism due to the sharp short-term decline. Foreign investors net sold 15,680.55 billion won in the KOSPI market throughout the day, with bullish defensive sentiment collapsing entirely. In addition to tech stocks, Hyundai Motor (005380) and Kia Motors (000270) both fell more than 5%, indicating that the sell-off has evolved into a systemic risk aversion, with funds rapidly withdrawing from high-cyclical blue-chip sectors.
Industry Fundamentals and Order Losses Resonate as Battery and Shipbuilding Sectors Face Concentrated Sell-Offs
The slowdown in electric vehicle demand is exacerbating negative transmission to the midstream supply chain, with battery manufacturer LG Energy Solution (373220) expecting a 77% year-on-year drop in second-quarter profits, causing its stock to plunge 7.33%. Additionally, Hanwha Ocean (042660) saw its stock plummet 22.91% after being excluded by Canada in a contract bid and opting for a German submarine solution. The weakening of industry fundamentals and sudden order losses resonated, leading to a concentrated revaluation of non-chip manufacturing blue-chip sectors.
Inflows into Safe-Haven Assets Boost Bond Market Recovery, Currency Market Slightly Rebounds Showing Defensive Characteristics
The severe volatility in the equity market prompted a shift of funds to fixed-income assets, with Korea's benchmark three-year government bond yield falling to 3.763% and the ten-year bond yield also slightly declining, indicating a gradual increase in safe-haven buying in the bond market. Meanwhile, the Korean won closed at 1,525.8 against the US dollar (USD/KRW) during domestic settlement, up 0.28% from the previous day. The currency market's counter-trend rebound and the decline in bond yields suggest that market-wide funds are reallocating from aggressive stock assets to relatively safe defensive assets across asset classes.
