Since July, semiconductor stocks have plunged, dragging down the broader market. But as the month's last trading day saw the semiconductor bellwethers stage a record rebound, expectations are rising that investor sentiment could recover across the market.
According to the Korea Exchange (KRX) on the 2nd, from July 1 to 29, 689 out of 943 KOSPI-listed stocks (73%) fell. On KOSDAQ, 1,453 out of 1,817 stocks (80%) posted negative returns, as overall market weakness persisted.
The sell-off that began in semiconductors weakened investor sentiment across all stocks. Samsung Electronics tumbled 38% over the same period, and SK hynix plunged 48%. A person in the financial investment industry said, "The sharp drop in semiconductor bellwethers heightened risk sentiment toward the broader market and triggered an overall market decline."
Sector performance backs that up. Over the same period, among 24 KOSPI sectors, electrical and electronics fell 41.66%, the steepest drop, while manufacturing (-36.78%), wholesale and retail trade (-27.52%), construction (-23.00%), and securities (-21.81%) were among 20 sectors that slid sharply. Gainers were limited to food, beverages and tobacco (6.18%) and pharmaceuticals (1.92%). Transportation and warehousing (0.84%) and textiles and apparel (0.47%) were flat.
Aftereffects from "debt-fueled investing" also fanned the market-wide decline. Cho Jae-woon, a researcher at Daishin Securities, said, "As semiconductors collapsed and account collateral ratios broke, margin calls (forced liquidation) occurred, and in that process, even KOSDAQ stocks remaining in accounts were liquidated together." In fact, margin lending balances fell to 32.1531 trillion won on the 30th from 37.3393 trillion won on the 1st, a drop of nearly 5 trillion won. During this period, the amount forcibly sold due to insufficient margin totaled 870.6 billion won.
However, with semiconductor stocks surging nearly 30% on the 31st, some see the possibility that rotation could spread across the market. Noh Dong-gil, a researcher at Shinhan Investment & Securities, said, "The fact that even sectors that had avoided semiconductor concentration were pushed below fair value shows that this correction was a correction in confidence, not in earnings," adding, "Rotation is likely to begin in earnest once the semiconductor decline stops and foreign selling ends."