[Closing Market Report] KOSPI plunges 4.91% on massive selling by foreigners and institutions, breaks below 7,660 level... Won-dollar exchange rate falls 2.1 won to 1,528.2 won at weekly close.

The domestic financial market was hit by a massive shock wave. As concerns over a global economic slowdown and fears of a peak-out in the semiconductor industry rapidly spread, the KOSPI index plunged nearly 5% in a single day. This was the result of indiscriminate selling bombs from foreign and institutional investors, centered on large-cap stocks.

According to the Korea Exchange (KRX) on the 7th, the KOSPI index closed at 7,656.31, plummeting 395.02 points (4.91%) from the previous trading day's close (8,051.33). The KOSPI started the day down 132.13 points (1.64%) at 7,919.20 from the previous session, and as time went on, selling pressure grew uncontrollably, exposing extreme volatility, with the index dipping to 7,389.22 at one point during the session. In the afternoon, some bargain hunting by individual investors partially recovered the losses, but it ultimately barely managed to close at the 7,650 level.

On the same day, the KOSDAQ index also could not escape weakness. The KOSDAQ closed at 831.23, down 15.84 points (1.87%) from the previous session's close. There were brief attempts at a rebound early in the session, but the fear sentiment originating from the KOSPI market fully transferred over, and the index ended on a downward trend, pushed down by joint selling by foreigners and institutions.

Foreign and Institutional 'Sell' Offensive, a Market Propped Up Solely by Individuals

Leading the sharp decline in the stock market on this day were the two major pillars of supply and demand: foreign and institutional investors. They maintained a massive selling bias across both the KOSPI and KOSDAQ markets, pulling down the indices.

In the KOSPI market, foreign investors recorded large-scale net selling, leading the downtrend. Starting right after the market opened, foreigners dumped profit-taking and risk-aversion volumes centered on large-cap stocks in the top market capitalization rankings, such as semiconductors and automobiles. Institutional investors also actively joined the selling ranks, mainly through financial investments, investment trusts, and private equity funds, increasing the downward pressure. The net selling volumes worth trillions of won poured out by these foreign and institutional investors mercilessly broke the market's downside support levels.

In contrast, individual investors absorbed the market's panic selling volumes with their full might. Individuals, judging each sharp decline as a bargain buying opportunity, gradually increased their buying scale and launched a full-scale 'buy' offensive. Although individuals fought a lonely defensive battle alone, they were unable to reverse the overwhelming selling flow from foreigners and institutions.

In the KOSPI market, foreigners and institutions sold 2.9174 trillion won and 307.4 billion won worth of shares, respectively. Meanwhile, individuals net purchased 3.1325 trillion won, stepping in to defend the index.

A similar supply-demand structure unfolded in the KOSDAQ market. While foreigners and institutions recorded joint net selling, putting pressure on the index, individual investors alone showed a net buying bias, absorbing the selling pressure. In the KOSDAQ market as well, individual buying supported the downside, but it could not prevent the overall contraction in investor sentiment.

The KOSDAQ index closed at 831.23, down 15.84 points (1.87%) from the previous session. In the KOSDAQ market, individuals and institutions sold 411.8 billion won and 23.4 billion won worth of shares, respectively, while foreigners bought 435.6 billion won worth.

Trends in Top Market Cap Stocks: The Semiconductor Duo Hit Hard, Major Large Caps Fall Indiscriminately

Major stocks in the top tier of market capitalization all turned red and collapsed miserably. In particular, the sharp decline in the leading large-cap semiconductor stocks, which are the backbone of the domestic stock market, stood out.

Most of the top 10 stocks by market capitalization on the KOSPI declined. Samsung Electronics (-6.92%), SK Hynix (-6.06%), SK Square (-9.30%), Samsung Electro-Mechanics (-9.85%), Hyundai Motor (-4.48%), LG Energy Solution (-6.35%), Samsung Life Insurance (-4.70%), and Samsung C&T (-5.56%) fell, while Samsung Biologics (1.21%) and KB Financial Group (1.35%) closed higher.

Samsung Electronics recorded a sharp decline of around 5% from the previous trading day, driven by concerns over slowing global semiconductor demand and doubts about the growth potential of the artificial intelligence (AI) sector. As foreign selling was concentrated on Samsung Electronics, the stock price was pushed down significantly, providing the biggest reason for the index decline.

The shock was even greater for SK Hynix. With concerns over intensifying competition in the High Bandwidth Memory (HBM) market and the possibility of global big tech companies adjusting the pace of their infrastructure investments, SK Hynix's stock price traced a steep downward curve throughout the session. Despite some bargain buying inflows late in the session, it closed with a deep decline from the previous session.

Aside from the semiconductor sector, other leading stocks in the top tier of KOSPI market capitalization also could not escape weakness. Major secondary battery stock LG Energy Solution and leading automobile stocks such as Hyundai Motor and Kia, which continue to face concerns over an EV chasm (temporary demand stagnation), also all ended in a downward trend amid capital outflows from foreign investors. Biotech leaders Samsung Biologics and Celltrion also could not avoid the spread of risk-aversion sentiment across the entire market and joined the downward flow.

Foreign Exchange Market: On the First Day of 24-Hour Trading, the Exchange Rate Settles at 1,528.2 Won, Down 2.1 Won

In contrast to the stock market's plunge, the foreign exchange market showed relatively calm movements, exhibiting a somewhat stable trend. Notably, this day was the first weekly closing day after the government's foreign exchange market structural improvement measures extended the regular trading hours for the won-dollar exchange rate from the previous 3:30 p.m. to 2:00 a.m. the next day.

On this day, in the Seoul foreign exchange market, the won-dollar exchange rate finished regular daytime trading (as of 3:30 p.m.) at 1,528.2 won, down 2.1 won from the previous trading day's daytime closing level. The exchange rate started at 1,528.9 won, influenced by overnight trading, and then heightened its high to the 1,530 won level early in the session due to news of the domestic stock market crash and remittance demand following foreign net selling of stocks.

However, the weakness in the global dollar value itself strongly constrained the upside of the exchange rate. As the U.S. June ISM Manufacturing PMI showed a moderate slowdown in line with market expectations, expectations for a rate cut by the Federal Reserve (Fed) were maintained, and the dollar index fell to the 100.84 level.

Furthermore, whenever the exchange rate approached the 1,530 won level, vigilance over the foreign exchange authorities' smoothing operations was triggered, suppressing follow-up buying sentiment from offshore investors. In the end, despite the record-breaking plunge in the domestic stock market, the won-dollar exchange rate closed on a downward trend, supported by the global dollar weakness and the authorities' vigilance.

Expert Recommendations: "Excessive Fear is Unwise, but Need to Check Macro Indicators"

Stock market experts diagnosed the day's crash as the result of the slowdown in U.S. economic indicators and the subsequent change in global asset allocation strategies being reflected somewhat excessively in the domestic stock market. The analysis suggests that the volatility was amplified by overseas negative factors due to the nature of the Korean stock market, which has a high external dependency and an absolute weight on semiconductors.

A research center head at an asset management firm explained, "As foreigners and institutions dumped trillions of won worth of profit-taking volumes, centered on IT and semiconductor large-cap stocks, the market's stamina rapidly deteriorated. The fact that the KOSPI's intraday decline reached 5% appears to be more influenced by market panic sentiment rather than fundamental factors."

Another securities analyst advised, "Considering that the won-dollar exchange rate closed relatively stably in the late 1,520 won range, no signs of systemic risk originating from the foreign exchange market are being detected. However, given that short-term market volatility has been maximized, a conservative, phased buying approach seems valid until the heightened fear sentiment subsides and the Fed's monetary policy direction and key economic indicators become visible."