South Korean stocks, led by major chipmakers Samsung Electronics Co. and SK Hynix Inc., saw a substantial decline on Monday, August 3rd, as foreign investors resumed selling after Friday's unprecedented surge. The KOSPI index dropped 4.9% to 6,272.8, giving back a significant portion of its historic 17.91% gain from July 31st. Samsung Electronics fell 7.8% to 242,000 won (about $168.80), while SK Hynix dropped 7.5% to 1,590,000 won (about $1,109.20), following its first daily upper price limit close in 17 years on Friday.
Foreign investors were net sellers on the main board, offloading 795.6 billion won (approximately $555.1 million), a sharp reversal from Friday when they bought a record 7.22 trillion won. This selling pressure also impacted broader emerging markets, with the KOSPI 200 down 5.3%, though the KOSDAQ saw a smaller dip of 0.35%. Analysts noted that this Monday's decline was primarily a local unwinding of Friday's unsustainable one-day spike, rather than an imported selloff, despite Wall Street closing higher.
Brokerages have been lowering their target prices for the chip giants, with Shinhan Investment & Securities cutting Samsung Electronics' target to 450,000 won from 590,000 won and SK Hynix's to 2.7 million won from 4.2 million won. Samsung Securities also reduced its targets for Samsung Electronics to 400,000 won and SK Hynix to 3 million won. Despite the recent volatility, some analysts, like Han Ji-young of Kiwoom Securities, believe there is room for a recovery in the domestic stock market, predicting a rebound to raise its lows, while others see a potential stabilization in the mid-to-upper 6,000 range, with a possible rapid climb to 8,000 for the KOSPI in August.
The sharp price corrections are not entirely attributed to peak-out concerns but rather to an excessive concentration of investment ahead of an anticipated memory boom. The market remains skeptical about the large sums invested in AI infrastructure, causing significant swings in chipmaking hubs like South Korea and Taiwan, which collectively represent about 45% of MSCI's emerging equity index. This makes the entire complex susceptible to the volatile movements within the semiconductor sector.
The South Korean stock market has experienced extreme fluctuations, with the KOSPI surging over 17% on Friday, marking its highest daily gain on record, only to see profit-taking and a significant drop on Monday. This comes after a period of intense retail investor activity, with over 1.2 million retail investors facing margin calls and around 360,000 accounts being forcefully liquidated after borrowing heavily for tech stocks, particularly memory chip makers. Analysts are predicting a rebound in August, with semiconductor and AI-related stocks still expected to lead the market, despite the current profit-taking pressures.
