Up One Day, Crashing the Next: KOSPI Volatility Intensifies

*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an "AI-based personalized 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. Down 6% in a Day, Erasing Previous Gains… KOSPI Swings More Than 5% Every 5 Days

- Key Summary: The KOSPI closed at 6,820.60 on the 16th, down 6.37% from the previous trading day, giving back the prior day's gains in a single session. Samsung Electronics (005930) and SK hynix (000660) led the index decline, plunging 8.77% and 11.53%, respectively. So far this year, the number of days the KOSPI has moved more than 5% has reached 28, meaning sharp swings recur roughly once every five trading days. As a result, the number of sidecar triggers this year stands at 37 for the KOSPI and 22 for the KOSDAQ, surpassing records set during the 2008 financial crisis.

2. Raising the 'Ammunition' Hurdle to Curb Leveraged Investment… "Not Enough to Immediately Lower Volatility"

- Key Summary: Financial authorities have decided to raise the base deposit requirement for single-stock leveraged products from the current 10 million won to 30 million won starting on the 5th of next month. The measure is seen as an effort to suppress demand itself by lowering the purchasing power of not only new entrants but also existing investors. However, since domestic market volatility stems from the share prices of overseas semiconductor companies, there are considerable concerns about the effectiveness of the regulation. A plan to strengthen the divergence rate management standard for liquidity providers (LPs) from 3% to 2% is also being pursued, but the industry response is that it is not enough to immediately lower volatility.

3. Shin Hyun-song: "We Will Raise Rates Until Convinced of 2% Inflation"… Year-End Rate Likely to Hit 3%

- Key Summary: The Bank of Korea raised its base rate for the first time in three and a half years, shifting to a tightening stance. BOK Governor Shin Hyun-song said the central bank would respond until it is convinced that inflation is stably converging to its 2% target. In the market, the prevailing forecast is that rates will rise to 3% by year-end after an additional hike in October, and to 3.25% in the first half of next year. Meanwhile, on the recent high volatility in the stock market, Governor Shin said there are not many channels through which it leads to financial system risk, expressing a position that he is not greatly concerned.

4. Raised Before the U.S.… Korea-U.S. Rate Gap Narrows to 1%P for First Time in 3 Years, 6 Months

- Key Summary: The Bank of Korea's Monetary Policy Board raised the base rate by 0.25 percentage point from 2.50% to 2.75% per year on the 16th, narrowing the Korea-U.S. rate gap to 1.00 percentage point. It is the first time in about three years and six months, since January 2023, that the Korea-U.S. rate gap has narrowed to the 1 percentage point range. As the widening of the rate inversion has been cited as a structural factor behind the won's weakness, this narrowing is assessed as a positive factor for exchange rate stability. However, since the gap could widen again depending on the direction of the U.S. Federal Reserve's (Fed) monetary policy, the exchange rate trend needs to be watched further.

5. ASML Signals Price Hikes… Conflict Escalates With Top Client TSMC

- Key Summary: As Dutch semiconductor equipment maker ASML pushes to raise prices for extreme ultraviolet (EUV) and deep ultraviolet (DUV) lithography, its conflict with top client TSMC is escalating. Lithography refers to exposure equipment that etches circuits onto semiconductor wafers, and due to high technological barriers, ASML effectively holds a monopoly. ASML has already notified Chinese semiconductor firms of a 10% DUV price increase, and some have accepted it, but TSMC, which accounts for 73% of the foundry market, is strongly resisting the price hike. ASML is also pressuring TSMC by noting that Intel accepted the raised price for High-NA EUV equipment.

6. TSMC, With Net Profit Up 77%, to "Invest $100 Billion More in the U.S."

- Key Summary: Boosted by expanding demand for artificial intelligence (AI) chips, TSMC posted second-quarter net profit of 706.56 billion New Taiwan dollars (about 33 trillion won), up 77% from the same period a year earlier. The figure exceeded market expectations and extended a streak of double-digit net profit growth to nine consecutive quarters. Advanced processes of 7 nanometers and below accounted for 77% of total wafer revenue, driving results, while the high-performance computing (HPC) segment, which includes AI chips, made up 66% of revenue. Accordingly, TSMC said it would add $100 billion to its investment in Arizona, expanding the total to $265 billion.