Korean Stocks Hit by ‘Black Wednesday’ as Chip Peak Fears Deepen; Kospi Ends at 7,246, Kosdaq at 785

Kospi closes at 7,246, Kosdaq at 785

Renewed Middle East war fears add to pressure

South Korea’s Kospi and Kosdaq indexes both plunged more than 5% on Wednesday as fears of a peak in the semiconductor cycle persisted and geopolitical tensions escalated after the US and Iran exchanged airstrikes.

The Kospi fell 5.35% from the previous session to close at 7,246.79 on July 8. The index briefly recovered above 7,700 early in the day before reversing sharply lower in afternoon trading. It was the first close in the 7,200 range in about 50 days, since May 20, when it ended at 7,208.95.

Of the 917 stocks traded on the Kospi market, 745, or 81.24%, declined. Samsung Electronics fell 6.25% and SK Hynix lost 5.68%, with all 10 of the market’s largest stocks by market capitalization closing lower. Samsung Group affiliates led the slide, including Samsung Electro-Mechanics, which dropped 10.25%, Samsung Life Insurance, down 7.73%, and Samsung C&T, down 6.95%.

Retail and institutional investors were net sellers of 215.7 billion won and 384.2 billion won, respectively, while foreign investors were net buyers of 543.1 billion won. Foreigners had been net sellers earlier in the session, but bought more than 1 trillion won late in the day to post their first net purchase in 13 trading days.

The Kosdaq fell below 800 for the first time in about 10 months. The index dropped 5.56% to close at 785.00 on July 8. It was the first finish in the 700 range since Sept. 3 last year, when it ended at 796.81. The gauge has fallen 35.98% in about two and a half months from its April 27 peak of 1,226.18.

Alteogen, the largest company on the Kosdaq by market value, fell 7.11%. All but three of the top 100 Kosdaq stocks by market capitalization closed lower. Biotech shares were among the biggest decliners, with ABL Bio down 13.21% and LigaChem Biosciences off 11.60%.

The selloff in both indexes was driven largely by worsening sentiment toward semiconductor shares. Lee Kyung-min, an analyst at Daishin Securities, said doubts about industry conditions emerged after Samsung Electronics released earnings. Uncertainty over the sector’s outlook continued to weigh on chip stocks.

The Kospi’s steeper decline relative to other markets reflected domestic factors, according to Han Ji-young, an analyst at Kiwoom Securities. Distortions tied to leverage in single-stock products worsened market flows, and pressure intensified after the index broke below its 60-day moving average, a medium-term trend line. Japan’s Nikkei 225 fell 2.11%, while Hong Kong’s Hang Seng China Enterprises Index rose more than 3%.

Signs of renewed conflict between the US and Iran also fueled global risk aversion. Iran said on July 8 that it had attacked more than 80 US military facilities in Kuwait, Bahrain and elsewhere.

Brokerages see the Kospi finding support around 7,200. Kiwoom Securities set a floor of 7,280, applying the 6.3 price-to-earnings ratio seen at the trough of the global financial crisis.

Kang Jin-kyu, Hankyung.com reporter josep@hankyung.com