The KOSPI index has dropped sharply for two consecutive days, prompting investors to focus on the stock market outlook for August.
On July 29, the KOSPI closed at 5,663.24, down 360.42 points (5.98%) from the previous day. The KOSDAQ index also fell by 43.17 points (6.12%) to close at 662.68, following a significant drop of 7.72% the day before.
During trading, the index experienced a decline of more than 8% for a minute, triggering a circuit breaker. This marked the first time that circuit breakers were activated on both the KOSPI and KOSDAQ for two consecutive days. When a circuit breaker is triggered, trading for all stocks is halted for 20 minutes.
The sharp decline is primarily attributed to semiconductor stocks. On July 28, the KOSPI fell by 10.84% to close at 6,023.66, following news of a successful IPO by Chinese memory semiconductor company Changxin Memory Technologies (CXMT) and advancements in China's semiconductor equipment technology.
Samsung Electronics and SK Hynix both saw their shares drop by over 14%. These two companies account for more than half of the KOSPI's market capitalization, causing the overall index to decline significantly. Foreign investors sold approximately 5 trillion won worth of stocks in the market that day.
On July 29, the announcement of SK Hynix's earnings contributed to further declines. Although the company reported a significant increase in profits, it fell short of market expectations amid the AI boom, leading to a sharp drop in its stock price.
The market is now questioning whether the current pace of AI investment can be sustained, beyond just focusing on current earnings. The excessive concentration of buying in some large semiconductor stocks, such as Samsung Electronics and SK Hynix, has also exacerbated the decline.
Looking ahead to August, both the potential for a rebound and the possibility of further volatility are being discussed.
Domestic securities firms have noted that the KOSPI has fallen too rapidly in a short period. They argue that the speed of the decline has outpaced downward adjustments in corporate earnings forecasts.
Market stabilization measures are expected to be a variable for the August stock market. Financial authorities have moved up the deadline for strengthening cash deposit requirements for individual investors in leveraged ETFs to July 31. Investors will need to maintain a minimum cash deposit of 30 million won to trade these products.
However, the tightening of regulations could lead to increased selling pressure as investors may rush to liquidate leveraged positions in the short term. It remains uncertain whether these regulatory effects will stabilize the market or lead to further capital outflows.
The earnings reports of major U.S. tech companies will also be a significant factor. The market is closely watching the performance and AI investment plans of major U.S. firms such as Microsoft, Meta, Amazon, and Apple.
In particular, NVIDIA's earnings report scheduled for August 26 is seen as a key event that could influence investor sentiment in AI and semiconductor stocks. If the results and future outlook do not meet market expectations, there could be renewed selling pressure on Korean semiconductor stocks.
Conversely, if there is confirmation of increased sales and orders related to AI, it could provide a catalyst for a rebound in the oversold semiconductor stocks.
Additionally, U.S. monetary policy and international oil prices will need to be monitored.
In August, key economic indicators such as the U.S. employment report and consumer price index will be released. From July 27 to 29, the annual economic policy symposium hosted by the Kansas City Federal Reserve will take place in Jackson Hole, Wyoming. This event will be attended by officials from major global central banks, economists, and policymakers, and the remarks of key figures could lead to sensitive reactions in global financial markets.
If geopolitical tensions in the Middle East cause international oil prices to rise again, it could heighten inflation concerns and weaken expectations for U.S. interest rate cuts. Rising interest rates and a stronger dollar could pose challenges for the Korean stock market, which has a high proportion of foreign investment.
* This article has been translated by AI.
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