▲ The won/dollar exchange rate, KOSPI, and KOSDAQ indices are displayed at the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, on the 19th. (Photo: Yonhap News)
The KOSPI experienced a sharp volatility plunge on the 19th in the wake of surging long-term government bond yields in major economies.
As foreign investors turned to net sellers for the first time in 6 trading sessions, driving the index down, investor attention is focused on the possibility of additional adjustments in the KOSPI and its potential for a future rebound.
As of 10:17 a.m. today, the KOSPI was trading at 6,570.96, down 298.87 points (4.35%) from the previous session.
Previously, the KOSPI rose for 5 consecutive trading sessions from the 10th until the 14th before turning downward the previous day, and the downward trend is continuing for a second consecutive day today.
The index opened at 6,528.77, down 341.06 points (4.96%) from the previous session, and widened its losses, plunging at one point by 6.83% down to 6,400.81.
It has since slightly reduced its losses.
Immediately after the market opened, a KOSPI sell sidecar was briefly triggered.
This marks the 48th KOSPI sidecar so far this year.
As investor anxiety mounts, the Kospi 200 Volatility Index (VKOSPI), often referred to as South Korea's "fear gauge," also surged 6.85% to 60.87, breaking past the 60 threshold.
This is the first time in 5 trading sessions since the 11th that the index has exceeded the 60 mark during trading hours.
The KOSPI had shown significantly reduced volatility since July 31, when stricter regulations took effect on single-stock leverage products, which had been pointed to as the main culprit behind the heightened volatility.
The sharp decline in the KOSPI today is attributed to New York stock markets stumbling and government bond yields spiking overnight amid escalating geopolitical tensions.
Earlier, the Dow Jones Industrial Average and the S&P 500 index fell 0.22% and 0.69%, respectively, while the Nasdaq Composite index dropped 1.33%.
Overnight, U.S. President Donald Trump stated on Truth Social that "there are no ongoing negotiations or talks with Iran, and none are scheduled," adding that the maritime blockade against Iran remains fully in place.
Meanwhile, tension escalated in the Strait of Hormuz following a vessel attack incident.
Consequently, Brent crude futures for October delivery and West Texas Intermediate (WTI) crude futures for September delivery settled higher by 0.17% and 0.52%, respectively, trading at $91.02 and $84.95 per barrel.
The yield on the 30-year U.S. Treasury bond climbed to the 5.33% range during trading, marking its highest level in 19 years since 2007.
As the shockwave of this yield surge spilled over to other countries, Japan's 10-year government bond yield rose to 2.945% during trading, hitting a roughly 30-year high, while long-term bond yields in Germany and France soared to their highest levels since 2011 and 2008, respectively.
Weighed down by high-interest-rate burdens, Nvidia (-2.343%) and Micron Technology (-7.02%) declined, sending the Philadelphia Semiconductor Index plunging by 4.98%.
SK Hynix American Depositary Receipts (ADRs) also plummeted by 9.20%.
Breaking down supply and demand, foreign investors, who had maintained a buying streak for the past five days, turned to net sellers today, dragging down the index.
Foreigners are currently net selling 1.4233 trillion won in the KOSPI market, and institutional investors are also in a net-selling position of 761.5 billion won.
Conversely, individual investors are alone on a net-buying streak, purchasing 2.0841 trillion won.
Foreign selling pressure currently appears heavily concentrated on semiconductor stocks.
Foreigners are net selling 1.1852 trillion won in the KOSPI electric and electronic goods sector.
As a result, Samsung Electronics and SK Hynix plunged 6.70% and 8.00%, respectively, leading the market downturn.
However, experts note that it is premature to view this as the end of the rebound rally.
Analysis suggests that the recent correction is largely driven by profit-taking sentiment following the KOSPI's 12% surge last week.
Some also analyze that although a slowdown in domestic corporate earnings momentum is anticipated, the fact that related concerns were already reflected in last month's plunge will limit further declines.
Han Ji-young, an analyst at Kiome Securities, pointed out, "Since major high-tier events are absent this week compared to the first and second weeks of August, a pathway may form where profit-taking driven by last week's short-term surge leads to a pressure for speed adjustment." She added, "However, there is no need to interpret this as the end of the rebound rally."
She further elaborated, "It is true that South Korea's export growth momentum is easing, but absolute growth momentum remains solid, such as overall export growth in the 40% range and semiconductor export growth in the 150% range," and added, "Furthermore, the possibility of peak-out in semiconductor earnings growth and KOSPI profit growth was already substantially reflected through the plunge in July."
At the same time, potential future U.S. benchmark interest rate hikes remain a variable for the stock market.
In particular, market attention is concentrated on the minutes of the July Federal Open Market Committee (FOMC) meeting, scheduled to be released early in the morning on the 20th, Korean time.
At that FOMC, 3 members dissented from the decision to freeze rates and advocated for a 25 basis point rate hike (1 bp = 0.01 percentage point). If the hawkish atmosphere proves stronger than expected, investor sentiment could shrink once again.
Jung Hee-chan, an analyst at Samsung Futures, explained, "While three regional Federal Reserve bank presidents cast dissenting votes supporting a rate hike during the July FOMC meeting, we need to pay attention to whether bets on benchmark rate hikes—which had moderated entering August as Federal Reserve officials digested assessments regarding inflation and employment risks—will expand again."
The shareholder return policies of major semiconductor stocks to be unveiled going forward are also cited as a watershed moment that will determine whether a rebound occurs.
Kim Jae-seung, an analyst at Hyundai Motor Securities, stated, "Samsung Electronics is expected to unveil its next three-year shareholder return policy as early as within August, and SK Hynix has also disclosed that it plans to reveal specific shareholder return measures to enhance shareholder value during the third quarter." He noted, "Whether the shareholder return policies announced by both companies can satisfy heightened market expectations will be a crucial variable determining the bull market for the domestic semiconductor sector."
Lee Eun-taek, a director at KB Securities, pointed out during a press conference held at the Korea Exchange the previous day that the 10-year government bond yield is an indicator that must be monitored alongside inflation, stating, "If this yield exceeds 5%, capital providers can return to securing safe returns.
If interest rates rise, massive capital flows will shift."
(Photo: Yonhap News)
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