U.S. stock markets reached new all-time highs, but South Korea's domestic markets declined for the second consecutive day. This downturn is attributed to cautious sentiment ahead of Samsung Electronics' preliminary earnings announcement and concerns over upcoming market closures. However, when looking at the past month, the situation appears different. While the large-cap KOSPI index has taken a breather, expectations for investments in artificial intelligence (AI) and semiconductors have shifted to smaller stocks in the KOSDAQ, widening the gap in returns.
According to the Korea Exchange, the KOSPI closed at 6,803.90, down 137.49 points (1.98%) from the previous trading day. Foreign and institutional investors sold a net 3.1095 trillion won and 861.3 billion won, respectively, while individual investors bought a net 3.2616 trillion won. This cautious sentiment is believed to be influenced by the anticipation of Samsung Electronics' earnings report on October 8.
External conditions were favorable. The Dow Jones Industrial Average rose 0.49%, while the S&P 500 and Nasdaq Composite increased by 0.58% and 0.45%, respectively, reaching new record highs. The rise in U.S. Treasury yields has stabilized, and positive earnings outlooks from Marvel and AMD's expansion to meet AI demand have bolstered investor sentiment regarding third-quarter earnings and AI investments.
Despite the positive momentum from the U.S., large semiconductor stocks struggled. Samsung Electronics and SK Hynix closed down 1.29% and 2.82%, respectively. LG Electronics also reported third-quarter operating profits below market expectations, raising concerns about the performance of large-cap stocks. As large-cap stocks falter ahead of earnings confirmations, there has been a noticeable shift in demand towards smaller stocks in the KOSDAQ.
In fact, over the past month, the KOSPI has fallen 2.74%, while the KOSDAQ has surged 9.27%. On this day, the KOSDAQ closed at 898.43, down 21.49 points (2.34%), slipping below the 900 mark again. However, just the day before, it had regained the 900 level for the first time in three months, driven by strong performances in semiconductor materials, biotechnology, and secondary batteries. Although it fell back below 900, the recent investment sentiment in KOSDAQ small-cap stocks remains relatively robust.
The KOSDAQ's relative strength is analyzed as a result of a rotation of demand from large-cap to small-cap stocks, rather than a general weakening of risk appetite in the domestic market. Han Ji-young, a researcher at Kiwoom Securities, stated, "The support for large-cap stocks like semiconductors is holding, which may have allowed for a rotation of demand towards KOSDAQ and small-cap stocks." He emphasized that the recent KOSPI weakness should not be interpreted solely as a decline in overall risk appetite in the domestic market.
Looking ahead, the gap between the KOSPI and KOSDAQ is expected to narrow, with Samsung Electronics' earnings serving as a potential turning point. One researcher noted, "If the preliminary results from Samsung Electronics indicate limited earnings damage for key sectors during the third-quarter earnings season and improvements in profit forecasts for 2027, it could pave the way for improved foreign investment and a reduction in the return gap between the domestic market and other markets."
* This article has been translated by AI.
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