KOSPI Falls Below 7,000 as Samsung, SK Hynix Lead Decline

South Korea's benchmark KOSPI index fell 2.70% on Monday, September 28, as trading resumed after the Chuseok holiday. Heavy foreign selling of Samsung Electronics and SK Hynix pushed the market back below 7,000, leaving it roughly a quarter below its June record.

Market Performance

• KOSPI closed at 6,889.74, down 191.18 points — the first close below the 7,000 level in four trading days.
• The session opened at 7,057.86 and weakened steadily.
• Samsung Electronics fell 5.43% to 270,000 won.
• SK Hynix dropped 5.05% to 1,768,000 won.
• Foreign investors net sold 3.24 trillion won of main-board shares.
• Institutions sold 1.02 trillion won, while individuals bought 2.61 trillion won.
• Losses were concentrated in the largest stocks: rising issues outnumbered decliners 611 to 249 on the main board.
• The secondary KOSDAQ rose 0.25% to 846.58, helped by a limit-up gain in HLB after its U.S. unit won FDA approval for a bile duct cancer drug.

Factors Behind the Decline

Much of the selling reflected events that occurred while Seoul was closed from September 24 to 27:

• The 10-year U.S. Treasury yield rose to 5.22%, its highest since 2007.
• The 30-year yield topped 5.5%, the highest since 2004.
• The won weakened by 7.6 won to 1,365.1 per dollar on Monday.
• Bank of Korea Senior Deputy Governor Kwon Min-soo told a market-monitoring meeting that uncertainty in international financial markets had risen further over the holiday and that the central bank would watch conditions closely.
• Sentiment toward AI hardware was hit after Oracle sent a "force majeure" notice to the developer of its Project Jupiter data center in New Mexico. Oracle said in a statement that "Project Jupiter remains on our planned schedule."

Lee Kyoung-min, an analyst at Daishin Securities, said the surge in Treasury yields and news of delays to Oracle's data center business had weighed on investor sentiment and left chip stocks clearly weaker. For SK Hynix, some analysts pointed to added pressure from reports that Solidigm, one of its subsidiaries, would pursue a U.S. initial public offering.

A Year of Sharp Market Swings

Monday's decline extends a volatile year for the KOSPI:

• January 22: KOSPI first crossed 5,000 intraday, a level President Lee Jae Myung had pledged to reach, amid an AI-driven memory chip cycle and government "value-up" policies.
• June 18: Closed above 9,000 for the first time.
• June 22: Set a record close of 9,114.55, the day SK Hynix overtook Samsung Electronics in common-share market value.
• June 19: Intraday record of 9,385.59 was set.
• Monday's close is about 24% below the record close.

The July Reversal

The reversal came in July:

• Foreign investors net sold about 17.9 trillion won of shares on the KOSPI and KOSDAQ in July through July 28.
• The index fell 10.84% in a single session on July 28, triggering both a sidecar and a circuit breaker.
• Analysts cited concerns about China's progress in chipmaking equipment and memory production (including ChangXin Memory Technologies), doubts about the durability of hyperscaler spending, and worries that memory earnings were peaking.
• Market participants also pointed to mechanical trading in single-stock leveraged ETFs tied to Samsung Electronics and SK Hynix as a source of amplified volatility.
• July 30: KOSPI closed at 5,593.56, about 40% below the intraday record.
• July 31: Surging 17.91% to 6,595.45 — its largest one-day gain on record — as foreign investors net bought 7.24 trillion won in a rebound brokerages attributed to strong quarterly results from Microsoft and a recovery in AI-related sentiment.

Regulatory Response

During the sell-off, the Financial Services Commission announced:

• From July 16, new listings of single-stock leveraged products and related advertising were barred.
• From July 31, retail investors must hold at least 30 million won in cash (up from 10 million won) before buying such products, which could include substitute securities.
• The commission said it would also consider bringing forward a planned increase in the minimum trading lot for domestically listed single-stock leveraged products to 20 shares from one, initially scheduled for November.

Recovery and Buybacks

The recovery since July has leaned heavily on the two chipmakers:

• August: KOSPI rose 3.40% to 6,820.02, even as foreigners net sold 9.79 trillion won and institutions 7.92 trillion won on the main board.
• August 19: SK Hynix announced it would repurchase and cancel 40 trillion won of its shares — the largest treasury share cancellation by a South Korean listed company.
• August 21: Samsung Electronics said it expected shareholder returns of about 90 trillion to 110 trillion won for 2026, including a third-quarter cash dividend of about 30 trillion won, alongside a separate buyback of about 15 trillion won for employee compensation.
• Monday was the last day to buy Samsung shares with entitlement to that dividend; the stock goes ex-dividend on September 29, ahead of the September 30 record date.

Buyback Progress

According to exchange disclosures tallied on September 20:

• Samsung had bought back 74.69% of its planned shares.
• SK Hynix had bought back 58.79%.
• Both programs were expected to finish by mid-October at their current pace.
• Between August 20 and September 18, corporate investors net bought 33.2 trillion won of shares while foreign investors sold 18.45 trillion won.

Daishin's Lee said: "Buying by other corporations has been helping put a floor under the market amid heightened external uncertainty. But it would not be enough to prevent the index from falling if selling by foreign and institutional investors intensifies."

Monetary Policy Tightening

Bank of Korea

• August 27: Raised its base rate by 25 basis points to 3.00%, its second straight increase, in a 6-1 vote (board member Hwang Kunil favored a hold).
• Lifted its 2026 growth forecast to 3.3% from 2.6% on semiconductor strength.
• The board said "inflation is expected to remain above the target level for a considerable time."
• Next rate decision is scheduled for October 22.

Federal Reserve

• September 16: The Federal Open Market Committee voted 12-0 to raise the federal funds target range to 3.75% to 4%, stating that "Inflation remains elevated."
• It was the Fed's first increase since 2023 and the first policy move under Chair Kevin Warsh.
• 12 of 18 officials projected one more hike this year.
• Daishin's Lee noted before the holiday that the probability of another 25 basis point Fed increase in October exceeded 50%.

Divergent KOSPI Targets

Global Banks (Bullish)

| Institution | Target | Notes | |-------------|--------|-------| | Goldman Sachs | 12,000 | Raised from 9,000 in early June; kept on September 4. Estimates KOSPI earnings growth of ~360% this year, slowing to 35% next year. Target implies 7.5x forward earnings vs. ~5.3x at the time. | | JPMorgan | 12,500 (base), 15,000 (bull), 8,000 (bear) | Lifted on June 25; kept base case on July 21, saying ~75% of deleveraging from leveraged ETF and hedge fund positions had taken place. | | Morgan Stanley | 9,000 | Upgraded Korea to overweight in early August. | | Nomura | 10,000–11,000 | Set in May. | | HSBC | Overweight | Moved to overweight in August. | | Citi | Neutral | Kept neutral stance. |

Measured against Monday's close, Goldman's target implies a gain of about 74% and JPMorgan's base case about 81%.

Domestic Brokerages (More Restrained)

• Daishin Securities: Cut 2026 target to 9,300 from 11,500 after the July collapse, lowering P/E multiples for chip and non-chip stocks due to higher U.S. yields and the prospect of further Fed tightening.
• Shinhan Investment: Cut target to 8,800 from 11,000.
• Samsung Securities: Left open an upper bound of 12,600 for year-end.
• Korea Investment & Securities: Left open an upper bound of 11,000 for year-end.

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