Same Wave, Different Tilt

KOSPI 6,035.35 (−348.89, −5.46%); KOSDAQ 837.03 (−1.43%). The KOSPI's intraday low was 5,911.11; the KOSDAQ's was 802.91 (−5.45%). The KOSDAQ sharply narrowed losses from 14:00. KOSPI trading value was KRW 26.7946 trillion. A sell sidecar triggered once, at 9:47:58. The low (−7.41%) did not reach the KOSPI circuit-breaker threshold (−8%).

Intraday report #26 used figures around 11:00. Much changed in the afternoon. Its body stays as an intraday record; the changed figures are collected here.

The index fell less in the afternoon, but foreigners sold twice as much, and the won weakened. Stocks outside semiconductors recovered as the afternoon progressed.

Five stocks accounted for 9 tenths of the index decline. Multiplying yesterday's market-cap weights by today's returns gives these approximations (common-share market-cap weighting; the actual index is free-float adjusted).

• SK hynix about −2.25pp
• Samsung Electronics about −2.06pp
• SK Square about −0.32pp
• Samsung Electronics preferred about −0.19pp
• Samsung Electro-Mechanics about −0.18pp

The five stocks total about −5.0pp.

Samsung Electronics lost KRW 108.2 trillion of market cap in one day; SK hynix lost KRW 118.3 trillion. The two companies alone lost KRW 226 trillion. Adding preferred shares, SK Square and Samsung Electro-Mechanics brings it to KRW 262 trillion.

Of 79 sectors, 18 rose. The biggest falls were semiconductors/equipment (−7.64%), cosmetics (−6.91%), life-science tools (−5.77%) and electronic equipment (−5.66%). Gainers were broadcasting/entertainment (+1.95%), cards (+1.91%), trade (+1.81%) and electrical products (+1.26%, including batteries). Even within semiconductors, 65 stocks rose and 105 fell. The sector's −7.64% reflects the weight of two giants. Of the KOSPI's top 50 stocks by market cap, 15 rose, including LG Energy Solution +3.02%, Hanwha Systems +3.86%, SK Innovation +2.62%, Meritz Financial Group +2.16%, Korea Electric Power +2.10% and Samsung Heavy Industries +1.94%.

Foreign investors sold KRW 4.5462 trillion on the KOSPI; 82% was in two stocks. SK hynix −KRW 2.3583 trillion; Samsung Electronics −KRW 1.3746 trillion. They sold 1.7x as much SK hynix despite Samsung's larger market cap. Their No.1 KOSPI net purchase, HD Hyundai Heavy Industries, was only +KRW 31.3 billion. They did not move the proceeds into other KOSPI stocks.

Splitting the buyers reveals their character.

• Individuals +KRW 2.2457 trillion. Of that, KRW 2.3087 trillion went into Samsung Electronics and SK hynix. Individuals sold other stocks to buy the pair.
• Financial investment +KRW 1.9576 trillion. This category combines brokers' proprietary trading, arbitrage and ETF liquidity provision. Institutional net buying (+KRW 1.6903 trillion) was effectively financial investment firms alone. Investment trusts (funds) instead sold −KRW 410.9 billion.
• Pension funds +KRW 51.4 billion. Barely any. Their net purchases today were in batteries (+KRW 67.8 billion, 4 stocks in Boboo from Sky's panel), rather than semiconductors.
• Other corporations +KRW 596.9 billion. Of that, KRW 547.6 billion went into Samsung Electronics and SK hynix. This suggests SK hynix's buyback is still providing support (company-level buying must be checked through disclosures).

Boboo from Sky's leadership classifier labeled today “oversold rotation — no directional funds” (translated). This means mechanical buying led by financial investment firms, without directional funds such as pensions and investment trusts, supported the afternoon rebound (interpretation). We have not confirmed whether that buying was liquidity-provider hedging against individuals' purchases of leveraged ETFs.

On the KOSDAQ, foreign investors and institutions traded the same semiconductor equipment stocks in opposite directions. The top foreign net sells and top institutional net buys were nearly the same list.

Conversely, institutions sold what foreigners bought: VM (foreign +KRW 37.1 billion; institutional −KRW 40.7 billion), Silicon2 (+KRW 23.6 billion; −KRW 31.8 billion), PharmaResearch (+KRW 18.5 billion; −KRW 23.7 billion) and Simmtech (+KRW 6.7 billion; −KRW 26.3 billion). KOSDAQ institutional net buying (+KRW 43.7 billion) was also led by financial investment firms (+KRW 172.5 billion); investment trusts (−KRW 70.4 billion) and private funds (−KRW 54.3 billion) sold.

The result was strength in equipment, testing and back-end processing. Doosan Tesna +7.43%, PSK Holdings +7.20%, TSE +6.98% and PSK +6.50% rose. PSK Holdings and TSE posted their highest closes this year. Within the same semiconductor industry, they stood opposite memory (−7–10%).

Price beneficiaries vs capex beneficiaries (X8, not a verdict): From the 10/8 regular-session close, the price basket (Samsung/SK hynix) was −12.80%; the capex basket (Jusung, WONIK IPS, EO Technics, PSK and LEENO) was −3.39%. Capex led by 9.42pp. Verdicts come only once each on 10/30 (H1) and 11/27 (H2). Today's capex lead was created by domestic institutional buying, mainly financial investment firms, while foreigners sold the same stocks.

Foreign investors bought Korean government-bond futures heavily during two days of stock selling. Net buying of 3-year government-bond futures was around 1–6 thousand contracts a day over October 2–8. It jumped to 34,789 on 10/12, the first sharp sell-off, and 14,312 today. For 10-year futures, it was 12,126 on 10/12 and 2,996 today.

Simply converting at KRW 100 million face value per contract gives about KRW 4.7 trillion on 10/12 and KRW 1.7 trillion on 10/13 (face value of futures positions). Government-bond yields fell over the same two days. This morning, the 3-year yield was 3.875% (−4.6bp) and the 10-year 4.245% (−6.1bp).

Some money read the stock sell-off as pointing toward a slowdown and Bank of Korea rate cuts (interpretation). The next policy meeting is 10/22. The US raised rates on 9/16, and the Cleveland Fed president said today that rates need to rise further. That same day, foreign investors positioned for lower rates in Korea. These figures support the intraday report's reading: “a day of money leaving large memory stocks, rather than worry about the country” (translated). Foreign investors shifted from stocks to rates, rather than reducing Korean assets across the board.

The won moved in the afternoon. USD/KRW stayed at 1,336–1,339 through the morning, then rose KRW 10.0 to 1,345.1 at 15:30 (won weakness). It was the largest rise in a month, since 9/17. The intraday low was KRW 1,331.2.

The reported reasons were custody demand to convert foreign stock-sale proceeds into dollars and foreign buying of dollar futures. Together, these outweighed exporters' dollar selling. This coincided with foreign net selling increasing from around KRW 2 trillion in the morning to around KRW 4.5 trillion at the close. Bonds stayed strong throughout. The won and bonds diverged that day.

Inside observation rule X7's window (base date 10/7; verdict 10/30), the KOSPI is −11.30% and USD/KRW +0.35%, using the reported 15:30 close before checking the Bank of Korea release. It remains in the rule's “decoupling” zone (KOSPI below −3%; USD/KRW below +0.5%), but moved toward the boundary from −0.1% in the morning. The verdict comes only once, at the 10/30 close.

The intraday report said, “The won barely moved” (translated). That was true through the morning. Stocks are sold on expectations for next year's memory prices. The won reflects a tug of war between current export receipts and stock-sale proceeds leaving. In the afternoon, the outflow side won (interpretation).

Memory was hit across Asia. Only indices heavy in semiconductors fell. Japan's Kioxia was −13.28%, Tokyo Electron −7.15%, SoftBank Group −8.50% and Advantest −2.91%; Hong Kong's SMIC was −1.16%. Taiwan's TSMC fell about 2% to TWD 2,490. Overnight in the US, Micron was −3.88%, SanDisk −5.97% and the Philadelphia Semiconductor Index −2.67%.

Japan is worth watching. The Nikkei 225, heavy in semiconductors and SoftBank, lost 1.82%, while broad-market TOPIX rose 0.14%. It resembles Korea's split between large caps (−5.90%) and midcaps (−0.64%). Shanghai Composite (+0.10%) and Hong Kong's Hang Seng (+0.30%) reversed morning losses before the close. This was a day of reducing memory/AI semiconductor exposure, rather than global risk avoidance (interpretation).

In Boboo from Sky's Asian comparison indicator (asia_beta), the semiconductor basket was −2.17%. After subtracting the KOSPI's usual response (β 1.42–1.55), the excess decline was around −2.1pp. The verdict is “neutral (nothing unusual)” (translated). Semiconductor concentration explains most of Korea's larger fall. The platform's center of gravity explains why the same wave tilted Korea most.

The KOSPI is 33.8% below its June 22 record close of 9,114.55. Beyond the index, however, a bear market has already lasted months. Against their peaks, LS ELECTRIC is −79.8%, HD Hyundai Electric −60.6% and Hyundai Motor −58.0%. Power-equipment and auto stocks had already lost more than half from spring/early-summer peaks.

The KOSPI remains 7.9% above its July 30 low of 5,593.56. Yet 20 of the top 80 stocks by market cap are already below July's low today: Hyundai Motor, Kia, Korea Electric Power, NAVER, Kakao, Samsung Biologics, Samsung Life Insurance, Industrial Bank of Korea, KT&G, Mirae Asset Securities, HD Hyundai Electric and 4 shipbuilders (Hanwha Ocean, HD Hyundai Heavy Industries, Samsung Heavy Industries and HD Korea Shipbuilding & Offshore Engineering), among others.

Near their highs are equipment/back-end stocks (TSE/PSK Holdings 0%, Jusung Engineering −5.9%), financials (KB Financial −12.8%, Meritz Financial Group −9%), refining (SK Innovation −3%) and LG Energy Solution (−15.4%).

Previous reports (#24·#25) recorded companies buying their own shares as September's last KOSPI buyers. In stock terms, the last pillars supporting the index were the two memory companies. Other pillars had already sunk. As those two now shake, the index is belatedly following the market lower (interpretation).

Some selling on down days happens independently of human judgment. Leveraged and inverse ETFs reset exposure near the close when the underlying asset falls. Both 2x and inverse products adjust toward selling on down days.

Boboo from Sky calculated only 19 of 103 domestically listed products with verified inputs (net assets KRW 15.4 trillion). Estimated sell-side exposure is about KRW 1.8208 trillion: single-stock products (Samsung/SK hynix and others) KRW 920.3 billion; index leverage KRW 900.5 billion.

Adding the remaining 84, including inverse products, could raise it further. This is comparable with same-day foreign net selling (KOSPI+KOSDAQ −KRW 4.4070 trillion). Which instruments were actually used—futures, swaps or cash equities—and when they traded were not observed (estimate; formula ΔE = L(L−1)·r·N).

Samsung Electronics/SK hynix single-stock leveraged products listed on May 27. Data submitted by the Financial Supervisory Service to the National Assembly showed realized individual losses of KRW 2.3242 trillion through August 14 (10 large brokers; unrealized losses excluded). If underlying stocks fall 8–10% as today, 2x products fall 16–20%. Responsibility for their introduction is an issue in this parliamentary audit, followed by the FSS audit on 10/19 and the financial-sector audit on 10/22.

As of 10/12, margin loans stood at KRW 34.2900 trillion (KOSPI KRW 26.7200 trillion; KOSDAQ KRW 7.5700 trillion) and client deposits at KRW 100.4400 trillion (KOFIA, published 1–2 business days later). Forced selling from collateral shortfalls usually comes a day or two later. A new 15% single-stock margin-credit concentration limit applies from 10/19.

After the close, Samsung Electronics traded around KRW 234,000 and SK hynix KRW 1,467,000 on the alternative exchange, up 1–2% (17:04). At the same time in US premarket trading, Micron was −2.9% and Korean equity ETF EWY −3.1%.

We will check the following this week and through the rest of the month.

The same wave passed. Korea's platform tilted most because it stood on two large buoys, rather than because the wave was bigger.