[Seoul Market Wrap] Korean Stocks Bleed as Heavy Selling Continues, Erasing Yesterday's Gains

Semiconductors and secondary batteries plummet due to concerns over AI capital expenditures, with Foreign Investors and institutions selling... It rebounded the previous day and went back in one day.

Key market trends

• ① Recurring concerns about AI funding… Taiwan also fell by 3%.

The domestic stock market fell sharply as concerns about AI capital expenditures and financing resurfaced. Selling was concentrated on all Asian technology stocks, with not only Korea but also Taiwan's stock market showing weakness in the 3% range.

The successive news of bond issuances by major technology companies such as Oracle, Meta, and Alphabet acted as a burden. As the financing interval for AI investment is shortening, concerns persist that the interest burden may increase due to high interest rates.

Antropic's performance and investment commitments also raised caution. Sales increased significantly, but operating profit again fell into the red, and AI-related purchase commitments amounted to approximately $900 billion. Of these, the amount committed until 2030 alone is $447.5 billion.

The fact that additional financing may be needed to fulfill large-scale investment commitments in a situation where the deficit continues has acted as a burden on the market. The possibility of investors asking AI companies to reduce spending was also discussed.

• ② Ignoring the decline in oil prices and interest rates... Semiconductors and secondary batteries plummet

International oil prices and U.S. Treasury yields fell, but the domestic stock market barely responded. This is due to the market's focus on AI investment costs and uncertainty ahead of the midterm elections.

Semiconductors and secondary batteries fell sharply, and communications equipment, semiconductor materials, parts, equipment, and oil refining stocks also showed weakness. On the other hand, aviation, shipbuilding and some pharmaceutical stocks rose selectively.

Foreign Investors were net sellers of almost all industries in the stock market. Even in KOSDAQ, there was no clear buying trend except for entertainment and culture.

Institutions also made net purchases in only some industries, such as pharmaceuticals, transportation warehouses, and food, and sold most of the rest. In KOSDAQ, selling was superior in most industries except chemicals.

• ③ Wait and see ahead of the midterm elections… From AI to 'Selection'

Movements to confirm the results ahead of the U.S. midterm elections have also become stronger. The prospect that data center-related policies could be affected by the election results dampened investment sentiment.

Concerns that expanded AI investment may reduce the ability to return shareholders through dividends and share buybacks are also putting a strain on U.S. technology stocks. As AI, which was evaluated as the most reliable growth engine, is faltering, the domestic stock market also appears to be returning to its existing range.

Supply and demand and industry

Institutional supply and demand, which had caused a rebound the previous day, weakened in one day. Even Foreign Investors were net sellers of most industries, and there was a lack of entities to defend the index.

In particular, as selling was concentrated in industries with great index influence, such as semiconductors and secondary batteries, the perceived decline also increased. On the other hand, as aviation, shipbuilding, and some pharmaceutical stocks rose, the trend of selecting industries and stocks continued rather than the entire market collapsing at once.

As institutional and pension fund purchases the previous day supported the bottom of Samsung Electronics and SK Hynix, it has become important to determine whether institutional supply and demand will flow back into these large stocks.

Market Man's Perspective

AI capital expenditure and financing issues are not new. This is an issue that has been raised repeatedly since last year, and the market is reacting sensitively again recently as earnings announcements and corporate bond issuances continue.

What has changed is that the market is changing from a market where all AI-related stocks were rising together to a market that considers performance and financial capacity. Rather than saying that expectations for AI growth itself have disappeared, it is closer to a process of selecting companies that can make actual profits while covering investment costs.

Even though oil prices and interest rates fell simultaneously today, the market barely reflected this. This means that investment sentiment has weakened, but on the contrary, if AI-related concerns are alleviated, it is necessary to look at the possibility that the decline in oil prices and interest rates can act as positive material again.

It is difficult to say that the bottom has been checked. However, as the recent declines have increased, the number of stocks that have fallen regardless of performance is also increasing. As volatility continues, it is necessary to look at price and supply and demand together, focusing on existing leading stocks, stocks with confirmed performance, and stocks with accumulated institutional purchases.

Source: Market Man's stock story t.me/shmstory

YouTube: Sihwangman TV www.youtube.com/@blueoak1004

This article was rewritten from Shihwangman's stock story Telegram post with the author's consent. All content may contain errors and cannot be used as a basis for buying or selling as it is not a recommendation to buy or sell. The content of this post cannot be used as legal basis under any circumstances.