South Korean stock markets saw a sharp decline, with the Kospi index falling to 5,572.98 points (down 7.48%) and the Kosdaq index dropping 8.05%. This brought the Kospi below the 6,000-point mark, which many investors considered a crucial support level. The decline was largely attributed to investor disappointment following SK Hynix's Q2 earnings report, despite record-high revenue of 79.32 trillion won and operating profit of 60.54 trillion won, as these figures slightly missed market expectations. This, coupled with concerns about a bubble in AI demand and increased supply from Chinese chipmakers, spurred a mass sell-off.
Adding to the market's woes, the financial authorities announced plans for additional regulations on single-stock leveraged Exchange Traded Funds (ETFs) to curb market volatility. These measures include potentially raising the minimum deposit requirement for purchasing such products to 50 million won (from 30 million won starting July 31st) and limiting investment to 20% of an individual's total financial investment. There's also consideration to reduce the current 2x leverage ratio for single-stock leveraged ETFs, although this would require protecting existing investors' rights and potential legal amendments.
The market experienced multiple circuit breakers due to the severe downturn. A program selling temporary halt (sidecar) was activated at 10:55 AM, followed by a circuit breaker on the Kospi at 12:32 PM, and another on the Kosdaq at 12:19 PM. This marked the first time in history that circuit breakers were triggered on both the Kospi and Kosdaq for two consecutive days. Analysts suggest that the current downturn is more a result of widespread 'panic selling' and the liquidation of excessive leverage rather than a fundamental deterioration of corporate earnings. They advise against hasty selling, recommending investors observe upcoming events like U.S. corporate earnings and the FOMC meeting.
