KOSPI down 3.52% as rates and chips erased yesterday's rebound

Today's mood

KOSPI gave back all of yesterday’s sidecar-day gain in a single session. It closed down 3.52% at 5,533.77, a 201.89-point drop that is larger than the 182.92 points it added yesterday.

Losses widened after the Bank of Korea held its base rate and said inflation would stay above target for a considerable period. According to Asia Economy, 174 KOSPI stocks rose and 709 fell.

Yesterday's checkpoint held only halfway

The two checkpoints at the end of yesterday’s note were whether KOSPI would close above 5,735.66 and whether foreigners would net buy for a second day.

KOSPI closed at 5,533.77, so the first test failed. Foreigners net bought 602 billion won on KOSPI (provisional), so the second held. We score it as half right. Net buying fell from 658.3 billion won yesterday to 60.2 billion won, too little to support the index.

The BOK held and kept tightening on the table

The Bank of Korea held its base rate at 3.00%. Edaily noted the hold followed hikes in July and August and was widely expected. MoneyToday reported the board said inflation would stay above target for a considerable period and that the timing and pace of further hikes would depend on inflation, growth and financial stability.

KOSPI began sliding around 10 a.m. as the decision came out and was down 3.31% at 5,545.74 by 1:50 p.m. The wording seems to have weighed more than the hold itself. USD/KRW fell 0.38% to 1,322.5 won (Hana Bank notice), so rate worries did not spill into the currency.

Samsung and SK Hynix gave back what they gained

Samsung Electronics fell 4.03% to 214,500 won and SK Hynix fell 5.49% to 1,223,000 won. Hankyung reported that all of the top ten stocks by market value fell, and SK Square dropped 3.59% to 751,000 won.

Edaily cited profit-taking after yesterday’s surge and Meta’s results after the U.S. close. Meta beat expectations but raised the low end of its capex outlook, gave no next-year revenue or spending guidance, and swung to negative free cash flow.

AI spending returns are still on trial

Edaily quoted Kang Jin-hyuk of Shinhan Investment as saying that strong results at individual companies do not prove returns on AI spending as a whole, so earnings season keeps acting as a test. Kiwoom’s Han Ji-young told Hankyung that volatility is unavoidable while U.S. hyperscalers and Korean chipmakers report through next week.

Samsung Electro-Mechanics rose more than 5% intraday on an Nvidia AI chip-substrate partnership, then closed down 1.97% at 1,145,000 won. On a day this weak, single-stock good news did not last.

Beginner note: free cash flow is the cash a company earns from operations minus capital spending. Negative free cash flow means it is spending more than it earns, so investors watch whether that spending turns into profit later.

Sector moves

Among 79 sectors, electrical products fell most at 6.22%, followed by oil and gas at 5.92%, chemicals at 5.26% and semiconductors and equipment at 4.71%. Steel lost 4.11% and shipbuilding 3.49%.

Construction was the lone standout, up 3.89%, but only 30 of its 78 stocks rose and 37 fell. One stock lifted the group rather than many moving together.

Institutions sold 463 billion won on KOSPI

On KOSPI, institutions net sold 463.0 billion won, while individuals bought 382.2 billion won and foreigners bought 60.2 billion won (16:21, provisional). Asia Economy put the decline down to institutional selling.

KOSDAQ was different: foreigners sold 120.6 billion won and institutions 100.3 billion won while individuals bought 221.4 billion won. The drops were similar, 3.52% on KOSPI and 3.62% on KOSDAQ.

Samsung E&A jumped 16% to lead construction

Samsung E&A rose 16.14% to 55,400 won. Third-quarter operating profit was 500.6 billion won, up 184% from a year earlier and, per Hankyung, about double market expectations. It also announced shareholder returns including share cancellation.

Its market value of 10.8584 trillion won passed Hyundai E&C at 10.3561 trillion, making it the largest construction stock. Trading value reached 636.8 billion won. The KRX construction index had fallen 13.75% this month through yesterday while Samsung E&A stood still, and today it broke away on its own.

KOSDAQ battery and equipment stocks slid

On KOSDAQ, Ecopro BM fell 9.66%, Jusung Engineering 8.93%, Wonik IPS 7.92% and Ecopro 7.54%. Edaily tied the equipment-stock weakness to the chip pullback. Samsung SDI lost 7.58%.

elice, listed this week, fell 32% on its first day and rose 17.15% today for a second-day rebound. Its 848.2 billion won of trading was the largest among the stocks we follow.

October is a soft month for KOSPI

Over the last 19 years KOSPI averaged -0.70% in October and rose in 47% of them. The month has already swung hard, so seasonality says little about direction, but a month with odds under half is worth remembering.

Earnings are next. Hanmi Semiconductor reports tomorrow, SK Hynix and Shinhan Financial on the 27th and Samsung Electronics on the 28th.

Two things to check tomorrow morning

First is tonight’s U.S. session, to see how far worry about AI spending after Meta spreads to U.S. chip stocks. Second is Hanmi Semiconductor’s results tomorrow, which will show whether chip-equipment stocks find support in earnings or extend today’s slide.

What our research turned up

On Naver Finance consensus, SK Hynix trades at 3.4 times this year’s expected earnings and Samsung Electronics at 4.7 times. Brokerage target prices sit 166.4% above the SK Hynix price and 130.9% above Samsung’s.

Prices have fallen faster than earnings forecasts. Those targets assume AI spending keeps growing, though, and on days like Meta’s that assumption itself is questioned.

Among the stocks we follow, Hanmi Semiconductor reports tomorrow, SK Hynix and Shinhan Financial on the 27th, Samsung Electronics on the 28th, Samsung Electro-Mechanics, KB Financial, Hyundai Motor, HD Hyundai Heavy, Hanwha Aerospace and Celltrion on the 29th, and Kia and APR on the 30th.

With the index leaning on two chip stocks, these reports could set its direction.

Sources

• Korea Economic Daily Korean-language article
• Asia Economy Korean-language article
• Money Today Korean-language article
• Edaily Korean-language article
• Korea Economic Daily Korean-language article
• Korea Economic Daily Korean-language article