KOSPI Plunges 8% as Foreign Selling Triggers Circuit Breaker

*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an "AI-based customized news recommendation and summarization service" developed with support from the Korea Press Foundation. It selects and provides six customized news items by reader type.

1. "Korean Market Is Squid Game": A Chilling Warning

- Key Summary: The KOSPI index closed at 7,656.31, down 4.91% from the previous trading day, triggering the sixth circuit breaker of the year, and trading was halted for 20 minutes at one point during the session as losses exceeded 8%. Foreign investors net sold 2.93 trillion won on the main bourse that day, extending their selling streak to a 13th consecutive trading session, with cumulative net selling this year reaching 171.43 trillion won. A structure running from surging semiconductor stocks to foreign profit-taking to won weakness has formed alongside another vicious cycle in which capital concentration in semiconductors drives up market interest rates and delinquency rates among small and medium-sized enterprises. Koo Yun-cheol, Deputy Prime Minister and Minister of Economy and Finance, said regarding leveraged ETFs (exchange-traded funds) being cited as a cause of stock price volatility, "We are discussing supplementary measures."

2. Memory Margin 83%: First Quarterly Break Above 100 Trillion Won Reaffirms 'Megacycle'

- Key Summary: Samsung Electronics announced preliminary second-quarter results of 171 trillion won in revenue and 89.4 trillion won in operating profit, with its memory division alone recording operating profit exceeding 100 trillion won for the first time in a quarter. The financial investment industry estimates memory business revenue at about 120 trillion won and calculates its operating margin at approximately 83%, exceeding Micron's (81%) to reach the highest level in the industry. Samsung Electronics has maintained its technological lead, becoming the world's first to mass-produce HBM4, the sixth-generation high-bandwidth memory (HBM) mounted on Nvidia's next-generation AI accelerators, and delivering samples of the seventh-generation HBM4E ahead of competitors. According to financial information provider FnGuide, securities firms' consensus estimate for Samsung Electronics' third-quarter operating profit is 110 trillion won and 120.8 trillion won for the fourth quarter, with some forecasts even projecting quarterly operating profit surpassing 140 trillion won next year.

3. Amid Claims of a "Market Reliant on Price Rather Than Volume," JP Morgan Sees a "Bargain-Buying Opportunity"

- Key Summary: According to the U.S. political news outlet Notus, U.S. Treasury Department analysts warned in a confidential report that a financial shock similar to the dot-com bubble collapse could occur if AI monetization fails, and Morgan Stanley likewise recommended reducing semiconductor stock exposure, judging that signals of a slowing investment pace can be detected in Meta's external sales of surplus AI computing capacity. In contrast, JP Morgan maintained its optimistic view that the recent decline in semiconductor stock prices is a bargain-buying opportunity, citing that global demand for AI semiconductors remains solid and that securing new production facilities will be difficult until 2028. Data center investment by the five Big Tech companies reaches $848 billion this year, and Meritz Securities diagnosed that memory supply will struggle to catch up with the pace of demand growth until the fourth quarter of next year. Meanwhile, experts agreed that rather than the strong second-quarter results, the specific contracts and future outlook that management will confirm in corporate earnings announcements late this month are more important at this juncture.

4. Samsung Mobile and Home Appliances 'Sluggish': Polarized Results Between DS and DX

- Key Summary: While Samsung Electronics' semiconductor (DS) division posted record results, operating profit in its finished-goods (DX) division, including smartphones and home appliances, is estimated to have plunged to below 1 trillion won in the second quarter. According to market research firm Counterpoint Research, the memory share of smartphone costs soared from 14% in the first quarter of last year to as much as 40% recently, sharply worsening profitability, while TVs and home appliances also could not escape the impact of rising raw material prices caused by the Middle East war. As the polarization of results between the DS and DX divisions widens the gap in performance-based bonuses, the possibility of intensifying labor-labor conflict has been raised, and the Samsung Electronics Labor Union Donghaeng has announced a rally of up to 3,000 people near the Suwon business site on the 16th. Under a policy of overcoming the crisis through new artificial intelligence (AI) and robotics businesses, Samsung Electronics announced plans to build a physical AI hub in Gumi, North Gyeongsang Province, including a 19 trillion won humanoid robot mass-production line.

5. Roller-Coaster KOSPI Worse Than Wartime: "When the Party Ends, Only Retail Investors Remain"

- Key Summary: The Korean stock market showed extreme volatility, with the KOSPI index moving up or down 3% or more on 41 of 125 trading days this year, and on 11 of 21 trading days in June alone. Foreign investors net sold 41.0944 trillion won over 13 consecutive trading days, and their holding ratios in Samsung Electronics and SK hynix (000660.KS) fell to their lowest levels in 17 years and 3 years and 2 months, respectively. The balance of credit trading loans, which reflects retail leveraged investment, stood at 37.66 trillion won, near a record high, while investor deposits fell by 27.4865 trillion won in a month to their lowest level in three months. The Wall Street Journal (WSJ) warned that "when the party ends, most of the losses are likely to be left with local retail investors," and experts analyze that uncertainty will only be resolved once the direction of AI capital expenditure (CAPEX) is confirmed in Big Tech earnings late this month.

6. Liquidity Concentrated Solely in Stocks: Balance of Rates, Exchange Rates, and Funds Broken

- Key Summary: The semiconductor-centered concentration in the stock market is delivering successive shocks to exchange rates, interest rates, and financial companies' funding conditions, breaking the balance of the financial market. As foreign investors net sold 149.0464 trillion won on the main bourse in the first half of this year alone, stimulating dollar demand, the won-dollar exchange rate has held in the 1,500 won range, which stimulates import prices and heightens the possibility of rising market interest rates and further base-rate hikes. As deposits at commercial banks and non-banking institutions flow out into the stock market, deposits at secondary financial institutions such as agricultural cooperatives, Saemaul Geumgo, and credit unions have decreased by more than 15.2 trillion won this year, while the volume of non-performing loans among small and medium-sized enterprises stood at 10.5 trillion won as of the end of March, the highest since March 2016. Lee Seung-heon, professor of economics at Soongsil University, pointed out that "the market is being exposed to volatility as it swings excessively," and experts predict that the more the concentration in stocks intensifies, the more this vicious cycle will deepen.