On July 16, the KOSPI index plummeted over 6% due to massive selling by foreign and institutional investors, falling below the 6800 mark. This week, the domestic stock market is expected to experience high volatility as it reacts to earnings reports from major U.S. tech companies, guidance on artificial intelligence (AI) investments, and geopolitical developments in the Middle East.
According to the Korea Exchange, the KOSPI closed at 6820.60, down 463.81 points (6.37%) from the previous trading day. In the securities market, foreign and institutional investors sold a net 2.1 trillion won and 3.08 trillion won, respectively, while individual investors bought a net 4.89 trillion won.
The KOSDAQ index also fell, closing at 791.84, down 37.59 points (4.53%). For the week, the KOSPI dropped 8.77%, and the KOSDAQ fell 5.44%.
Last week, the domestic stock market faced high volatility due to concerns over geopolitical risks in the Middle East and the sustainability of AI investments. Shinhan Investment Corp. noted that skepticism regarding AI investment companies has amplified its impact on the domestic product market. The KOSPI 200 volatility index (VKOSPI) remained above 80, with daily fluctuations around 5%.
The biggest variable for the market this week is the earnings announcements from major U.S. tech companies. Starting on July 23 (Korean time) with Alphabet, key hyperscalers will reveal their earnings and AI investment guidance. Market analysts view these companies' investment plans as crucial for the semiconductor sector's direction.
Labor Gil, a researcher at Shinhan Investment Corp., stated, "The current adjustment is characterized by skepticism regarding AI investment companies, which has amplified its effects on the domestic product market. Until we confirm the earnings and AI investment guidance from U.S. tech companies, the market is likely to react more sensitively to negative news than to positive developments."
Despite the recent sharp decline, assessments indicate that corporate fundamentals have not been significantly damaged. The U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) for June both fell below market expectations, easing inflation concerns. TSMC reported record sales for the second quarter, and ASML raised its earnings and annual guidance, reaffirming demand for AI logic and memory expansion and addressing equipment bottlenecks.
Lee Jae-won, a researcher at Yuanta Securities, commented, "The demand and supply dynamics, as well as profit directions in the semiconductor sector, have not changed enough to justify this sharp decline. This adjustment is more a result of technical and supply-demand shocks rather than fundamental issues."
Exchange rates are also seen as a positive factor for the stock market. Shinhan Investment Corp. forecasts that the won-dollar exchange rate will fluctuate in the upper 1400s, supported by declining U.S. inflation, net foreign purchases of domestic stocks, and the successful listing of SK Hynix's American Depositary Receipts (ADRs). Additionally, the upcoming decision by the Bank of Korea's Monetary Policy Committee on interest rates and strong export performance from July 1 to 20 are expected to help control the upper limit of the won-dollar exchange rate.
Market experts advise that while high volatility is inevitable in the near term, excessive pessimism should be avoided, considering past instances of sharp declines. Lee Sang-yeon, a researcher at Shin Young Securities, stated, "Unless we are at the beginning of a bubble collapse or systemic crisis, selling during a sharp decline often leads to missing out on rebounds. Individual investor sentiment has not yet collapsed, and as long as the bullish trend remains, the impact of recent volatility will be limited."
* This article has been translated by AI.
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