KOSPI Plunges 3% as Rates, Oil and AI Doubts Converge

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.

1. KOSPI Closes at 6,684, Falling for a Third Straight Session

Key points: The KOSPI closed at 6,684.37 on the 14th, down 225.54 points, or 3.26%, from the previous session, surrendering the 6,700 line. Volatility was extreme: the index fell as low as 6,654.82 intraday before bargain hunting lifted it back above 6,900, only to plunge again late in the session. Foreign investors sold a net 3.91 trillion won and institutions a net 1.69 trillion won, unloading more than 5.6 trillion won combined in a single day, while individuals bought a net 4.13 trillion won. Lim Jung-eun, an analyst at KB Securities, said sensitivity to macro variables will increase ahead of the September FOMC and Bank of Japan meetings, adding that investors need to watch foreign investor flows and whether chip stocks regain leadership.

2. Won Closes at 1,347.30 Under Dual Pressure From Oil and Rates

Key points: The won closed at 1,347.30 against the dollar, up 1.40 won from the previous session and rising into the upper 1,340 range. West Texas Intermediate crude topped $103 a barrel intraday, surging more than 3% on news that Saudi Arabia had shut down its east-west pipeline, adding to upward pressure on the dollar. Citi identified five risk factors likely to shake financial markets through the end of the year: a hawkish Federal Reserve, rising global bond yields, an unwinding of the yen carry trade, an oil shock and disruptions to European natural gas supplies. Market participants said the possibility of further Fed rate increases along with higher oil prices and yields are upside factors for the won-dollar rate, while exporter dollar selling and expectations of a stronger yen should limit the extent of the increase.

3. The 18th Is the Watershed for Kakao's Spinoff

Key points: Minority shareholders and the labor union have voiced successive opposition to the small-scale merger of Kakao Investment, the first hurdle for Kakao's spinoff, and the merger process would be halted if holders of 20% or more of total shares outstanding object. With minority shareholders accounting for 64.83% of total shares, fewer than a third of them would need to band together to derail the spinoff. Kakao stresses the need for the spinoff, saying the valuation gap is wide, with market capitalization at around 16 trillion won against a combined business valuation of about 34 trillion won as assessed by brokerages. The company plans to hold a briefing for minority shareholders on the 16th to win them over, and the results when the deadline for filing opposition closes on the 18th are expected to be the watershed that effectively decides the outcome.

4. Covered Call ETFs Hide Losses Behind High Distribution Rates

Key points: Among the 19 domestic covered call ETFs with the highest annual distribution rates, 14, or 73.7%, posted total returns over the past year that fell short of their distribution rates, and four had outright negative total returns. PLUS High Dividend Weekly Covered Call had a distribution rate of 23.34% but its price fell 36.94%, leaving a total return of minus 23.88%. SOL Palantir Covered Call OTM Bond Mixed had a distribution rate of 28.65% and a total return of minus 2.56%. With interest rates continuing to rise, bond-based covered call ETFs face the added burden of downward pressure on bond prices. Net assets jumped 86.6%, from 15.04 trillion won at the end of last year to 28.06 trillion won as of the 10th of this month, prompting calls for holders to re-examine the underlying assets and option structures of the covered call ETFs they own.

5. Lee Kyu-hong Named New NPS CIO, Facing a Pile of Tasks Including Equity Rebalancing

Key points: The National Pension Service announced on the 14th that it had appointed Lee Kyu-hong, former chief investment officer of the Korea Teachers Pension, as the new CIO to lead its 1,866 trillion won fund, with a two-year term starting on the 15th. During the tenure at the Korea Teachers Pension, the new CIO lifted returns from minus 2.39% in 2018 to 11.95% in 2021 and delivered 2.47 trillion won in investment income, the largest since the fund's founding at the time. Key pending issues include the timing and direction of domestic equity rebalancing, measures to stabilize the exchange rate through foreign currency bond issuance, and resuming private equity fund commitments that have been suspended for two years. Because the direction of fund management is directly linked to domestic equity flows and the exchange rate, analysts said the new CIO's early moves warrant attention for their market impact.

6. AI Security Market to Grow 73% Next Year, Putting Beneficiaries in Focus

Key points: Gartner forecast that global spending on the AI security market will rise 68.7% from $2.835 billion this year to $4.783 billion next year and approach $7.7 billion by 2028. AI usage control, which governs the scope of AI access to corporate systems, is expected to grow 73.0% next year, the highest growth rate among related subsegments. Revenue in South Korea's information security industry reached 7.12 trillion won in 2024, up 15.9% from a year earlier, and domestic security firms including SK Shieldus and AhnLab are rapidly commercializing services such as AI agent access control and vulnerability testing. Because demand for AI security grows alongside wider AI adoption, analysts said the medium- to long-term growth potential of domestic information security stocks deserves attention.

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