KOSPI Rises Despite Semiconductor Market Turmoil from U.S.

The South Korean stock market closed higher despite a sharp decline in semiconductor stocks originating from the U.S. The KOSPI index initially fell over 3%, dipping below the 5,500 mark, but recovered to surpass 5,700, buoyed by institutional buying. However, investor sentiment in the semiconductor sector remains shaky, with Samsung Electronics and SK Hynix both experiencing intraday drops of over 4%.

On October 19, the KOSPI finished at 5,768.01, up 99.96 points (1.76%) from the previous trading day. The index opened at 5,488.41, down 179.64 points (3.17%), but reversed course during the session. Institutions purchased a net 574.8 billion won, lifting the index, while individual and foreign investors sold a net 1.086 trillion won and 36.5 billion won, respectively.

Notably, the volatility of major semiconductor stocks was pronounced. Samsung Electronics fell to 206,500 won during the day, down more than 4% from the previous close. SK Hynix also saw a decline of over 4%. However, buying interest later pushed Samsung Electronics to close at 218,000 won (up 1.16%) and SK Hynix at 1,277,000 won (up 0.39%).

Lee Kyung-min, a researcher at Daishin Securities, noted, "Investor sentiment regarding artificial intelligence (AI) remains subdued, contributing to the ongoing weakness in the semiconductor sector. However, the recent sharp decline has attracted bargain hunters, leading to a strong rebound in non-semiconductor sectors such as secondary batteries, pharmaceuticals, and chemicals, which helped drive the market higher."

The early session drop was attributed to concerns stemming from the previous week's U.S. market, where AI investment anxieties spread. On October 16, the Nasdaq index fell by over 2%, with major semiconductor stocks like Micron and Broadcom also experiencing significant declines. There are growing worries that the profitability of companies involved in AI infrastructure may not keep pace with the substantial investments being made.

In fact, the Philadelphia Semiconductor Index dropped 11.41% last week, while the Nasdaq fell 4.48%. Analysts suggest that the widening credit risks for AI infrastructure companies have led to profit-taking and reduced investment in tech stocks. The KOSPI had already fallen 14.46% from October 12 to 16, but managed to rebound on this day, although external uncertainties remain unresolved.

Market participants are closely watching Meta's third-quarter earnings report, set to be released after the U.S. market closes on October 21. According to the Financial Times, the market expects Meta's third-quarter revenue to exceed $63 billion, but there are concerns about slowing growth and increased costs related to AI investments. If future profit growth falls short of market expectations or if investment cost burdens are greater than anticipated, selling pressure could increase on both U.S. tech stocks and domestic semiconductor shares.

Seo Sang-young, a researcher at Mirae Asset Securities, stated, "It is essential to focus on AI-related revenue growth, capital investment plans, and profitability outlook in this week's Meta earnings report. There will likely be a heightened effort to determine whether the expansion of AI investments translates into actual profit growth."