Multiple factors driving the correction of Korean stocks: profit-taking and foreign capital collectively withdraw, oversupply risk amplifies fundamental concerns.

Mars Finance News: On July 6, according to market data, South Korean stocks have been in continuous turmoil and pulling back. On July 2, the KOSPI index once fell by nearly 8%, triggering a trading halt. SK Hynix dropped by more than 14%, while Samsung fell by more than 9%. On July 3, during early trading, it once dropped by more than 3%, before rebounding sharply. Today, South Korean stocks continued to decline amid ongoing volatility, at one point falling by more than 3%, driven by multiple factors:

First, Samsung and SK Hynix have overly high weightings, leading to concentrated profit-taking. Currently, the combined weight in the KOSPI of the two major AI memory core stocks—Samsung Electronics and SK Hynix—has risen to about 50%, and volatility in the storage sector alone will cause the entire South Korean index to swing sharply. After a run of continuous large gains in recent months, concentrated profit-taking has become the driving force behind the recent natural pullback.

Second, pullback sentiment from U.S. stocks spills over. Around the Korean market, in recent days, broad pullbacks in U.S. sectors such as semiconductors, memory chips, and optical communications have triggered a global tech stock selling wave. The market is concerned about the sustainability of AI capital expenditures and valuations that are too high. South Korean stocks are highly sensitive to U.S. tech stock sentiment and are also affected by the spillover of sentiment from the U.S. market.

Third, the fragility of South Korea’s market structure amplifies the decline. The asset size of 2x leveraged products tracking Samsung and SK Hynix is enormous—far exceeding the stocks’ own average daily trading volume. During downturns, forced rebalancing further increases selling, intensifying the downward move. Retail investors’ high leverage combined with margin trading creates a chain reaction, causing South Korean stocks to frequently experience extreme volatility.

Fourth, foreign capital is exiting South Korea. In recent days, South Korea’s foreign investors net sold KOSPI stocks worth 7.7 trillion won (about $4.98 billion) on Monday, setting the record for the largest single-day net sell-off in history. Combined with factors such as pressure on the won exchange rate, this further undermines foreign investors’ confidence.

Fifth, the risk of oversupply has raised concerns about fundamentals. Samsung and SK Hynix plan to make massive investments to build new memory factories, with a total scale of several hundred billion dollars. The market worries that after future production capacity increases significantly, memory prices will face downward pressure. At the same time, major customers such as Nvidia have also slowed the pace of demand for higher-stacked HBM, causing the market’s confidence in the sustainability of an “AI super cycle” to waver.