[Seoul Market Wrap] South Korean Stocks Bleed as Investors Face Relentless Selloff

Samsung Electronics and SK Hynix give up most of their gains, dragging the KOSPI down by nearly 120 points. Concerns over AI investment costs resurface as foreign investors turn to selling in the electronics sector, citing oil prices and geopolitical tensions.

Key Market Trends

• ① SpaceX's impact fades, AI financial worries return.

Samsung Electronics and SK Hynix lead the KOSPI lower, erasing most of their previous gains. The market's perception that SpaceX's strong results were largely priced into domestic stocks yesterday gained traction, and the company's stock price failed to sustain its intraday gains, closing below the previous day's after-hours level.

The sharp decline of Lam Research in after-hours trading, despite beating market expectations, further weighed on semiconductor investor sentiment. The focus shifted from the actual results to the market's elevated expectations, triggering profit-taking pressures.

Meta, which reported earnings after the market close, saw its excess cash flow turn negative, bringing AI investment cost concerns back into the spotlight. Tesla also gave up its intraday gains and turned negative.

Market Jitters Return as AI Profitability Concerns Resurface

• ### Rising Oil Prices and Geopolitical Risks Weigh on Markets

The U.S. State Department has ordered some personnel to leave Saudi Arabia due to safety concerns following repeated attacks by Houthi rebels.

With no significant progress reported on mediation efforts between the U.S. and Iran, and amid reports of Ukrainian attacks on Russian energy facilities, the market is on edge.

The rise in international oil prices during Asian trading hours has put pressure on investor sentiment. As the Northern Hemisphere enters the winter season, a period of increased oil demand, concerns over price stability are mounting.

The dual burden of AI investment cost worries and rising oil prices has led to significant declines in major Asian stock markets.

• ### Samsung Electronics and SK hynix Drag Markets Down; Foreign Investors Turn to Selling

Samsung Electronics and SK hynix have given up most of their gains from the previous day.

The decline in these two large-cap semiconductor stocks has been significant, with a combined impact of approximately 120 points, dragging down the KOSPI index. Foreign investors have shifted to a selling stance, contributing to the market downturn.

Market Weakness and Sector Performance

Key sectors, including automobiles, secondary batteries, and financials, experienced widespread declines, with all top 20 market capitalization stocks in the red as of 3:10 p.m.

Foreign investors turned to net selling, primarily in the electronics sector, with machinery, chemicals, and food & beverage also seeing selling pressure.

Transportation equipment, metals, and pharmaceuticals were net buyers.

Institutional investors engaged in net selling of electronics, metals, chemicals, and transportation equipment, while buying financials, retail, and pharmaceuticals.

On the KOSDAQ, both foreign and institutional investors were net sellers.

Supply and Demand Dynamics, and Sector Trends

Recently, the domestic market has seen increased volatility, driven by changes in foreign investor behavior.

Customer deposits have decreased to the lowest level since the beginning of the year, falling to the 90 trillion won range, while credit balances have also shrunk.

With the termination of buyback programs by SK hynix and others, one of the key pillars supporting market liquidity has weakened.

Pension funds are also in a position where they cannot significantly increase their exposure in the short term, leaving foreign buying and selling as the primary driver of index movements.

In line with this trend, large-cap semiconductors, which had a sharp rebound on foreign buying the previous day, gave up most of their gains as foreign investors turned to selling.

Market Watch: A Critical Analysis

Market Sensitivity to News

The market has become overly sensitive to daily news, with reactions amplified on a day-to-day basis. While yesterday's performance was driven by positive earnings reports from SpaceX and Super Micro, today's focus shifted to Meta's cash flow and Larry Research's stock price reaction, reigniting concerns over AI's financial implications.

Supply-Demand Imbalance and Volatility

The domestic market's supply-demand dynamics are contributing to increased volatility. A decline in customer deposits and credit balances, coupled with the end of self-stock purchases, has left foreign investors with a significant influence over market direction. We must consider the potential for sharp declines and rapid rebounds in the near term.

Market and SK Hynix's Decline

Notably, the recent decline in the market and SK Hynix's share price has reached levels not seen since the financial crisis. Despite this significant adjustment, semiconductor earnings estimates have not yet shown a notable downward trend.

A Multi-Faceted Perspective

It is essential to view these developments in a broader context. The cooling off after the AI overheating, supply issues, and listing-related matters have all simultaneously impacted the market. While considering short-term volatility, it is crucial to monitor the extent of the decline in certain stocks relative to their earnings performance.

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This article is a reconstructed version of a post from Shi Hwang Man's Stock Story Telegram channel, with the author's consent. Please note that all content may contain errors and is not intended as a buy or sell recommendation. It should not be used as a basis for investment decisions. The content of this post cannot be used as legal evidence under any circumstances.

Market Analysis

In early trade, the KOSPI index experienced late-session selling pressure, erasing intraday gains and closing at 2,373.85, a 0.45% decrease from the previous day. The KOSDAQ index also faced margin call liquidations, ending the day at 822.86, down 0.48%.

Key Market Drivers

• **Yield Rates:** The rise in U.S. Treasury yield rates, particularly the 10-year rate, influenced the market's direction.
• **Commercialization:** Concerns over the commercialization of new technologies and their impact on existing industries created volatility.

Sector Performance

• **Technology:** The tech sector witnessed a decline, with investors cautious about the sector's growth prospects.
• **Energy:** Energy stocks gained ground, benefiting from rising oil prices.

Market Outlook

As we head into the upcoming trading week, market participants will closely monitor global economic indicators and corporate earnings reports. The focus will be on assessing the impact of rising interest rates and its potential effect on the overall market sentiment.