Although Samsung Electronics (005930.KS) reported preliminary second-quarter earnings that beat market expectations, the KOSPI closed down nearly 5% Monday. Analysts attribute the drop to a sharp deterioration in investor sentiment driven by a semiconductor "sell-on" phenomenon, in which stock prices fall despite positive news, amid a 13-session run of net selling by foreign investors. The main bourse triggered its 16th sell sidecar and sixth circuit breaker of the year.
According to the Korea Exchange (KRX), the KOSPI closed at 7,656.31 on the day, down 395.02 points, or 4.91%, from the previous session. The index opened at 7,919.20 before widening its losses, falling as low as 7,389.22 intraday and threatening the 7,400 line. However, it pared some of its losses late in the session to close in the 7,600 range.
Foreign selling drove the flows. Foreign investors net sold 2.9173 trillion won on the main bourse. Institutions also posted net selling of 309.2 billion won. Individuals net bought 3.1343 trillion won, absorbing the supply. Foreign investors extended their net selling streak to 13 consecutive sessions through the day.
As the intraday plunge deepened, market safeguards activated one after another. The KRX triggered a sell sidecar (a temporary suspension of program sell orders) on the main bourse at 10:23:41 a.m. A sell sidecar is a system that suspends the effect of program sell orders for five minutes to ease the impact of a sharp drop in futures prices on the spot market, and it was the 16th such trigger this year alone.
In the afternoon, the KOSPI's losses widened to around 8%, triggering a circuit breaker. It was the sixth this year. A circuit breaker is a measure that halts all market trading in stages when the KOSPI or KOSDAQ index falls 8%, 15%, or 20% or more from the previous session and remains so for one minute.
Most top market-cap stocks were weak. Samsung Electronics closed at 296,000 won, down 6.92% from the previous session, giving up the 300,000 won line. Samsung Electronics said on the day that its preliminary second-quarter operating profit came in at 89.4 trillion won. Although the figure exceeded the market consensus of 84.8 trillion won by more than 5%, the market treated the strong earnings announcement as the passing of an event and unleashed profit-taking.
SK hynix (000660.KS) closed at 2.201 million won, down 6.06%. SK Square (-9.30%), Samsung Electronics preferred shares (-6.21%), Samsung Electro-Mechanics (-9.85%), Hyundai Motor (-4.48%), and LG Energy Solution (-6.35%) all fell in succession. Samsung Biologics rose 1.21%.
Korea Investment & Securities analyzed that the KOSPI fell below its 60-day moving average as foreign net selling continued despite Samsung Electronics' strong earnings. It noted that there had been past cases of selling emerging after earnings announcements, and viewed the day's decline as stemming from the passing of an event. However, it explained that the loss expanded to an excessive level amid greater market volatility following the launch of leveraged exchange-traded funds (ETFs).
Samsung Securities cited profit-taking following the rise in memory semiconductor stocks, concerns over slowing earnings growth in the second half, and doubts about the sustainability of AI investment as the backdrop for the day's plunge. With the combined market-cap weighting of Samsung Electronics and SK hynix in the KOSPI exceeding 50%, it explained that the wobble in large-cap semiconductor stocks expanded into volatility across the entire index.
Some in the securities industry say that while short-term volatility may continue, it is too early to conclude this is a trend-based decline. Han Ji-young, an analyst at Kiwoom Securities, said, "It is right to refrain from interpreting volatility as directionality and reading the recent increase in volatility directly as a trend-based decline in the index's direction." He added that the KOSPI's third- and fourth-quarter earnings level-up is greater, including Samsung Electronics' second-quarter results, and analyzed that the index has already been pushed down to a zone where a valuation-based rebound could emerge.
