As foreigners unloaded memory chip stocks sharply in July, the KOSPI index sank in one swoop from the 8,400 level to the 7,200 level. However, semiconductor value chain (value chain) stocks appeared among the top net buys by foreigners. Analysts said they are cutting back on the portion of memory chips that surged in a short period while maintaining a medium- to long-term investment stance on the artificial intelligence (AI) semiconductor ecosystem.
According to the Korea Exchange (KRX) on July 9, foreigners recorded a net selloff of 12.19 trillion won in the stock market this month (July 1–8). Under the heavy selling, the KOSPI index plunged 14.5% from 8,476.48 on June 30 to 7,246.79 on July 8. Retail investors net bought 11.4669 trillion won, helping to defend against the index's drop.
◇ Selling large-cap chip stocks, buying the AI value chain
Foreign selling was concentrated in large-cap semiconductor stocks. The top three net sells this month were Samsung Electronics (6.2836 trillion won), SK hynix (4.4675 trillion won), and SK Square (1.19 trillion won). Compared with No. 4 net sell KB Financial Group (298.1 billion won), the selling scale was overwhelming.
By contrast, foreigners net bought semiconductor value chain corporations. Among the top net buys were LG Innotek (321.9 billion won), DB HiTek (269.9 billion won), LEENO Industrial (239.7 billion won), ISC (about 204.5 billion won), and HANMI Semiconductor (about 200.3 billion won).
LG Innotek produces iPhone camera modules and glass substrates (FC-BGA) for artificial intelligence (AI) semiconductors. DB HiTek is a system semiconductor foundry (contract manufacturing) corporation that produces power semiconductors, among others. LEENO Industrial and ISC are specialized semiconductor test socket corporations, and HANMI Semiconductor makes back-end process equipment such as TC bonders.
However, there are also signs that foreigners are picking up large-cap chip stocks again. On the 8th alone, the No. 1 foreign net buy was SK hynix (172.7 billion won). It was followed by Samsung Electro-Mechanics (157.5 billion won), LG Innotek (109.4 billion won), SK Square (76.5 billion won), and HD Hyundai Heavy Industries (76.3 billion won), in that order, drawing in buying interest.
◇ The key to a KOSPI rebound is sustained AI investment
Brokerages said the foreign selling that appeared in July is entirely different in nature from June. While June's selling was a simple portfolio rebalancing by foreign funds, the recent selling is said to reflect investor sentiment weighed down by "peak-out" concerns that memory chip earnings may have peaked and could head lower.
Byun Jun-ho, an IBK Securities researcher, said, "Despite strong semiconductor earnings, foreign selling pressure is continuing," and added, "It appears investor sentiment about an earnings peak-out had more influence than fundamentals (corporations' basic strength)."
In the end, whether foreigners resume net buying depends on the sustainability of AI investment, analysts said. Earnings announcements by U.S. big tech corporations scheduled for late this month and whether they expand AI capital expenditure (CAPEX) are cited as key variables that will determine the market's confidence in the semiconductor cycle.
Noh Dong-gil, a Shinhan Investment & Securities researcher, said, "The market has already begun to doubt the cycle beyond 2027," and added, "Strong second-quarter results are not enough; additional information is needed to confirm an upward revision to third-quarter guidance and the sustainability of AI CAPEX."