Kospi Fell 3% at the Open — Buybacks Erased It by the Close

Today's Foreign Investor Flows

A 3% Plunge in the First Six Minutes, a Flat-to-Higher Close

Hawkish remarks from Fed Chair Kevin Warsh at the Jackson Hole symposium on Friday appear to have triggered a selloff in U.S. semiconductor stocks that carried straight into Monday's Seoul session. The Philadelphia Semiconductor Index fell 3.47% and Nvidia dropped 4.6%, even after a strong earnings report the day before. Bond markets reacted immediately: the policy-sensitive 2-year Treasury yield jumped to 4.35% intraday, a one-month high, while the 10-year yield rose to 4.72%.

That pressure hit Seoul the moment trading opened. The Kospi fell 241.12 points (3.55%) to 6,547.76 within the first six minutes, led lower by Samsung Electronics and SK Hynix, which each dropped more than 3% at the open. But the mood shifted entirely as the session went on. The Kospi closed up 0.46% at 6,820.02, while the KOSDAQ — Korea's tech-heavy secondary board, similar to the Nasdaq — closed down 0.49% at 834.29, a split outcome between the two indexes.

Samsung's ₩15 Trillion, SK Hynix's ₩40 Trillion — A Buyback Breakwater

Behind the Kospi's ability to erase its opening drop was a wave of share buybacks from the two largest semiconductor names. Samsung Electronics plans to buy back roughly ₩15 trillion in shares on the open market between August 24 and November 21 for employee stock compensation, while SK Hynix is buying back and fully cancelling about ₩40 trillion in shares between August 20 and November 19. Combined, the two companies have disclosed roughly ₩55 trillion in planned buybacks, of which about ₩44.72 trillion remained as of August 28.

Monday was also a day both companies had pre-announced specific purchases — 2 million shares for Samsung and 650,000 for SK Hynix. Their staggered buying through the session is read as having supported the index while institutional selling eased. The timing was compounded by another event: MSCI's periodic rebalancing of its Korea index also landed on Monday's closing auction, with LG Innotek newly added to the index effective September 1. With passive rebalancing flows and the two buyback programs both concentrated in the same closing auction, "other corporations" (a Korean market investor-type category distinct from institutions, foreigners, and individuals) posted net buying of ₩1.5433 trillion, offsetting net selling from institutions (₩909.6 billion), foreign investors (₩443.5 billion), and individuals (₩191.7 billion).

KOSDAQ Sags on Biotech Weakness While Battery and Platform Stocks Diverge

KOSDAQ's weakness traced back to a broad pullback in the pharma/biotech sector. Alteogen fell 3.91% as the sector overall declined 4.74%, with profit-taking that had been building since mid-August hitting the sector's bellwether name especially hard.

Battery large-caps moved differently despite the same risk-off mood. LG Energy Solution (+2.16%), Ecopro (+1.22%), and Ecopro BM (+2.2%) all closed higher, with foreign investors net buyers even as institutions were net sellers. Samsung Biologics (+2.15%) and Rainbow Robotics (+0.99%) also held modest gains. Naver (-1.59%) and Kakao (-0.81%) moved the other way — Kakao couldn't overcome institutional selling despite foreign inflows, while Naver saw both foreign and institutional investors pull back at once.

Semiconductors and Batteries Rebound, Biotech and Platforms Correct

Semiconductors, which had a clear buyer in the form of corporate buybacks, and batteries, which drew foreign inflows, both erased their early losses and closed higher. Biotech, weak across the sector, and internet platforms, hit by concentrated institutional selling, didn't share in the index's rebound and stayed in correction mode.

Samsung, SK Hynix, LG Energy Solution Close Higher; Naver, Kakao, Alteogen Close Lower

Samsung Electronics (+1.17%) and SK Hynix (+1.27%) turned positive on heavy buyback support despite falling more than 3% at the open. LG Energy Solution (+2.16%), Ecopro (+1.22%), and Samsung Biologics (+2.15%) also closed higher on foreign buying. Naver (-1.59%) and Kakao (-0.81%) were weighed down by institutional selling, and Alteogen (-3.91%) extended its decline amid sector-wide biotech weakness.

Broadcom Earnings and the U.S. Jobs Report Preview the Next Wave

With U.S. rates swinging and repeatedly stirring selling pressure, markets are watching whether upcoming Broadcom earnings and the U.S. jobs report can calm nerves. Barclays has already called Warsh's Jackson Hole remarks decidedly hawkish and revised its forecast to include 25-basis-point rate hikes in both September and December, meaning each incoming data point could trigger larger market reactions ahead of next month's FOMC meeting. Samsung Electronics' and SK Hynix's buyback programs run through November, so whether that flow keeps supporting the Kospi's downside is the key thing to watch.

Stories From Beyond the Kospi Ticker

Photo: Rihards Sergis / Unsplash

One of the biggest beneficiaries of Korea's equity rally has been the National Pension Service (NPS), Korea's public pension fund. As of end-June, NPS's fund assets stood at ₩1,866 trillion, with a provisional first-half return of 27.22%. That already exceeds last year's full-year return of 18.82%, itself a record since the fund's founding — and this year it took just six months.

Domestic equities drove the performance, returning 107.37% and overwhelmingly leading the fund's overall gains. Overseas equities returned 17.81% on the back of the AI investment cycle and tech-stock strength, alternative investments returned 9.60%, and overseas bonds returned 9.22% helped by the won's depreciation against the dollar. Domestic bonds were the one laggard, returning -3% as rising market rates pushed bond prices down.

That return is a snapshot as of end-June, though, and worth reading with a caveat. Fund assets grew by ₩407 trillion from ₩1,458 trillion at the end of last year to ₩1,865 trillion at end-June, but the Kospi's sharp correction since then has likely pulled that valuation back down. With domestic equities now a larger share of the portfolio, the index's future path matters more than ever to NPS's return.

Photo: Brian Kostiuk / Unsplash

Understanding this week's Kospi flows starts with the buyback calendars of the two semiconductor giants. Samsung Electronics is buying back roughly ₩15 trillion in shares between August 24 and November 21 for employee stock compensation; SK Hynix is buying back and fully cancelling about ₩40 trillion in shares between August 20 and November 19.

Combined, the two companies' disclosed buyback plans total roughly ₩55 trillion. Their disclosed daily order caps are 7.321 million shares for Samsung and 2.407 million for SK Hynix, but actual average daily volume has run well below that — about 1.96 million and 650,000 shares respectively — suggesting plenty of buying capacity remains.

As of August 28, roughly ₩4.47223 trillion of the total remained unexecuted. With the buying window open through November, whether this flow keeps supporting Kospi large-caps in the months ahead is worth watching.

Photo: Jakub Żerdzicki / Unsplash

By coincidence, another major flow event landed on the same closing auction as this buyback rally. MSCI's periodic rebalancing of its Korea index fell on Monday's close, with the revised index taking effect from September 1.

For global passive funds that track the index directly, rebalancing orders get concentrated into that single closing auction — and this round added LG Innotek to the MSCI Korea index.

The result: passive rebalancing orders and the two chipmakers' buyback purchases landed in the same closing auction at once, adding to the session's intraday volatility, according to market commentary.

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