Kospi Plummets Amid 'Double Whammy' of Geopolitical and Tech Woes

South Korean stock markets plunged on June 28, with both the KOSPI and KOSDAQ indices experiencing significant drops, triggered by a confluence of geopolitical and industry-specific concerns.

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(In today's market) the influence of macro factors like exchange rates, oil prices, and interest rates was not visible. It seems to be all about semiconductors.

The market downturn was fueled by escalating tensions in the Middle East, coupled with growing "semiconductor peak" theories. Adding to the pressure were reports of China's drive for semiconductor independence and concerns regarding the profitability of artificial intelligence investments in the United States. This combination of factors led to a chaotic trading session, with both the KOSPI and KOSDAQ markets activating trading suspension mechanisms like sell-side cars and circuit breakers.

Ultimately, the KOSPI closed down 10.84% at 6,023.66, while the KOSDAQ fell 7.72% to 705.85. Analysts pointed to the semiconductor sector as the primary driver of the decline, noting that macroeconomic factors like currency exchange rates, oil prices, and interest rates were not the main influence. Concerns about over-investment originating from Meta's earlier statements and the potential for a peak in semiconductor demand had already been circulating, exacerbated by questions about the sustainability of Samsung Electronics' strong performance.

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There were already concerns about over-investment originating from Meta earlier this month, and the semiconductor peak-out (peak theory) was emerging, along with questions about whether Samsung Electronics' strong performance could continue.

Further pressure came from news of emerging semiconductor competitors in China, specifically the rapid rise of CXMT after its listing on the STAR Market. Although CXMT's market share is considerably smaller than industry leaders like Samsung Electronics and SK Hynix, its surge has heightened investor worries about shifts in the global supply chain structure. Additionally, a report detailing Nvidia's alleged payment guarantees to OpenAI and concerns about "circular trading" in large-scale collaborations and investments led to significant drops in major US tech stocks, including Nvidia, Micron, and Sandisk, impacting the Philadelphia Semiconductor Index.

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As semiconductor stocks have undergone sharp adjustments since July, investor sentiment has weakened, making them react sensitively to news from China.

Looking ahead, the market is anticipating a potential turnaround with a series of major events. SK Hynix is set to release its earnings on June 29, followed by other large domestic and international tech companies. The US Federal Reserve's interest rate decision, scheduled for June 30, is also a key factor. Analysts suggest that the current market adjustment may be a necessary process to resolve the excessive concentration of profits and market capitalization in the semiconductor sector, expressing cautious optimism for a future rebound.

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The current adjustment phase is a process of resolving the concentration of profits and market capitalization into the semiconductor industry.