This week (June 29–July 3), the top question for Korea's stock market is whether the cooled semiconductor rally will resume. Last week, the KOSPI suffered extreme volatility, including circuit breakers being triggered twice in a single week for the first time ever.
Semiconductor stocks plunged amid a pullback in U.S. tech and half-year-end flows, but the securities industry still largely says the artificial intelligence (AI) memory cycle remains solid. Expectations for semiconductor earnings and shifts in foreign and pension fund flows are cited as the key variables that will set this week's market direction.
This week, Korea's June exports and imports trend will be released on July 1, and the U.S. jobs report is scheduled for the 2nd. Both indicators are expected to show favorable trends, but if the employment data far exceeds market expectations, easing rate-cut bets could serve as a pretext for short-term profit-taking.
Last week, semiconductors determined both the start and the finish of the market. Early in the week, SK hynix overtook Samsung Electronics to become No. 1 in market capitalization, lifting the market on AI Semiconductor optimism. But later in the week, Samsung Electronics and SK hynix tumbled as Apple's price hike announcement, concerns over slowing memory demand, and profit-taking coincided, pushing the KOSPI intraday down to the 8,100 level. Volatility expanded further as half-year-end foreign portfolio rebalancing piled on.
Still, the securities industry remains positive on the semiconductor cycle itself. U.S. Micron reported results that beat market expectations. Experts said Micron's "surprise earnings" confirmed a structural shift in the memory industry.
Lee Jae-won, an analyst at Yuanta Securities Korea, said, "We should note that prolonged supply shortages driven by AI and the expansion of strategic customer agreements (SCA) are turning the memory industry from a spot market to one centered on long-term contracts," adding, "This increases the likelihood that memory semiconductors will be revalued from a cyclical sector to a structural growth industry."
However, the continued outflows of foreign funds, which have been selling steadily, remain a burden. From the 19th to the 26th, foreigners' cumulative net selling topped 20 trillion won. By contrast, individuals increased investor deposits to a record 136 trillion won, stepping in to buy the dip on pullbacks.
Single-stock leveraged ETFs tied to Samsung Electronics and SK hynix are also cited as factors amplifying market volatility. As trading in single-stock leveraged ETFs has surged, cash equity trades have expanded during rebalancing, repeatedly spreading the volatility of these two highly index-influential stocks across the entire KOSPI, analysts say.
The analyst said, "With single-stock leveraged ETFs and passive ETF flows concentrated in top market-cap names overlapping, even small noise greatly amplifies selling pressure," adding, "In past sharp swings, the National Pension Service's domestic stock net-buying capacity helped underpin the downside via dip-buying, but its quota has already been fully used."
Many also interpret the recent pullback as stemming more from short-term flow factors than from a deterioration in fundamentals. The explanation is that once half-year-end rebalancing wraps up, foreign selling pressure could gradually ease.
Jo A-in, an analyst at Samsung Securities, said, "The recent share-price volatility stems more from changes in investor sentiment than from fundamentals," adding, "Volatility could continue to widen with shifts in sentiment, but given that corporations' earnings growth remains solid, it is unlikely that the correction will turn into a sustained downtrend."
By contrast, many expect the KOSDAQ to remain relatively weak for the time being. With flows still concentrated in large-cap semiconductor and AI names, the introduction of a tougher delisting regime starting July 1 is expected to weigh on investor sentiment toward small and mid-cap stocks.
The Korea Exchange (KRX) will hold a ceremony the same day to mark the 30th anniversary of the KOSDAQ market. While development directions for the KOSDAQ will be discussed, the release of the originally slated detailed promotion-and-relegation plan has been pushed back to September.
Kang Jin-hyeok, an analyst at Shinhan Investment & Securities, said, "With corporate presentations (IR) by Alteogen and ROBOTIS scheduled, share prices could react," but added, "We expect differentiation by stock."