Black Wednesday Hits Markets Despite SK Hynix Record Earnings

On July 29, the Korea Exchange reported that the KOSPI closed at 5,663.24, down 360.42 points (5.98%) from the previous trading day. The KOSDAQ started at 713.71, up 7.86 points (1.11%), but quickly turned downward, finishing at 662.68.

The sharp decline triggered the 15th first-stage circuit breaker in history and the ninth this year for the KOSPI. The KOSDAQ also activated its 14th first-stage circuit breaker, marking the first time both markets experienced simultaneous circuit breaker activations for two consecutive days.

Earlier that day, SK Hynix reported its second-quarter consolidated revenue at 79.3187 trillion won and operating profit at 60.5426 trillion won. Despite these record earnings, the figures fell slightly short of market expectations, failing to revive investor sentiment. SK Hynix's stock plummeted by 9.61%, while Samsung Electronics dropped 5.23%, leading to a widespread sell-off in major semiconductor stocks.

Han Ji-young, a researcher at Kiwoom Securities, analyzed, "The panic selling that spread across the market was driven by a loss of confidence after the previous day's sharp decline, leading investors to lock in losses."

Market Analysis

According to Yuanta Securities, the recent drop was not due to systemic risks akin to the Lehman crisis or a sudden economic collapse, but rather a result of overwhelming investor sentiment and supply-demand dynamics. Existing concerns, such as China's development of deep ultraviolet (DUV) lithography equipment and the expansion of Changxin Memory Technologies (CXMT), were exacerbated by the lack of a special shareholder return policy announced during SK Hynix's earnings call.

The combination of single-stock leveraged exchange-traded funds (ETFs) and margin trading has created a downward spiral, where declines lead to further declines. Currently, the KOSPI's 12-month forward price-to-earnings ratio (PER) stands at approximately 4.8, a historically low valuation.

However, August may bring stabilizing factors to the market. Easing tensions between the U.S. and Iran have led to a rapid stabilization of oil prices. Additionally, the upcoming earnings reports from major U.S. tech companies will provide insights into the ongoing expansion of AI investments. Furthermore, the new regulations on single-stock leveraged ETFs, effective at the end of July, may reduce market volatility by alleviating excessive trading and concentration in large-cap stocks.

Moving forward, the strategy should focus on gradually investing in semiconductor stocks with confirmed earnings and growth stocks that have seen excessive declines, rather than succumbing to fear-driven selling. As the effects of the single-stock leveraged ETF regulations begin to manifest, funds concentrated in Samsung Electronics and SK Hynix may diversify into the KOSDAQ and policy beneficiaries.

Key Announcements After Market Close (July 29)

LG U+ to buy back 90 billion won worth of shares to enhance shareholder value.
Jusung Engineering reports second-quarter operating profit of 1.4 billion won, down 78% year-on-year.
Krafton posts second-quarter operating profit of 410.9 billion won, a 67% increase.
Samsung C&T reports second-quarter operating profit of 1.0317 trillion won, up 37.1% year-on-year.
LG Electronics completes a 100 billion won share buyback, with a 500 won interim dividend per share.
Hanwha Solutions reports second-quarter operating profit of 306.5 billion won, up 200.3% year-on-year.
HD Hyundai Heavy Industries posts second-quarter operating profit of 1.0399 trillion won, up 120.6% year-on-year.
SK Hynix reports second-quarter operating profit of 60.5426 trillion won, up 557.2% year-on-year.

Fund Trends (As of July 28, Excluding ETFs)

Domestic equity funds: 22.642 trillion won
Overseas equity funds: 2.22 trillion won

Today's Schedule (July 30)

Germany: GDP growth rate (Q2), Consumer Price Index (July)
Eurozone: GDP growth rate (Q2), Consumer Confidence Index (July)
U.S.: GDP growth rate (Q2), Personal Consumption Expenditures, Household Income (June), PCE Price Index (June)
Korea Earnings: Samsung Electronics, Samsung Electro-Mechanics, Samsung SDI, LG Electronics, LG Energy Solution, SK Innovation, POSCO Holdings, Amorepacific, JBM, K-Bank, Kiwoom Securities, POSCO Future M, Korea Electric Power, Samsung SDS, Lotte Fine Chemical, etc.

* This article has been translated by AI.