[R&E] KOSPI Drops 4.9% Amid 3.7 Trillion Won Foreign Selling, Circuit Breaker Triggered Despite Samsung Electronics' Earnings Surprise

[R&E: Research & Epoch] This is News Epoch's signature report that overviews a new era of investment through an integrated analysis of global financial data and domestic brokerage research.

Global Market Brief

The U.S. stock market in New York closed lower across the board yesterday as rising geopolitical risks coincided with a surge in interest rates. The S&P500 index fell 0.45% from the previous day to 7,503.85pt, and the tech-heavy Nasdaq index dropped 1.16% to finish at 25,818.69pt. The Dow index, centered on traditional industries, also closed down 0.25% at 52,925.15pt, and the Philadelphia Semiconductor Index (SOX) plunged 4.65% to sink to 12,300.52pt. However, the fact that the SOX narrowed its intraday drop from the 7% range to the 4% range by the close shows that the market's anxiety did not run to an extreme.

The direct fuse for the market decline was the escalation of military tensions surrounding the Strait of Hormuz. After the Iranian Revolutionary Guard Corps fired a missile at a merchant ship near the Strait of Hormuz, the U.S. launched a retaliatory strike and announced through the Treasury Department that it would revoke sanctions waivers on Iranian crude oil for 60 days. In the aftermath, West Texas Intermediate (WTI) crude oil extended its gains late in the session, surging more than 5% from the previous day to $72.3 per barrel.

Concerns over the reignition of inflation also pressured the market. According to the Survey of Consumer Expectations released by the Federal Reserve Bank of New York, the one-year expected inflation rate rose by 0.2%p from the previous month to 3.7%, reaching its highest level since September 2023. Accordingly, U.S. Treasury yields rose, with the 10-year yield up 8.2bp to 4.5511%, and the 30-year yield up 7.1bp to 5.0557%. The burden of high interest rates acted as a decisive factor inducing profit-taking in overvalued technology stocks and the semiconductor sector.

Domestic Market Summary

The domestic stock market yesterday suffered a record plunge as global macro headwinds hit head-on. The KOSPI index recorded 7,656.31pt, down 4.91% from the previous day, and the KOSDAQ index also closed down 1.87% at 831.23pt. Notably, the KOSPI market triggered a circuit breaker, temporarily halting trading as the intraday decline exceeded 8%. It is the 12th circuit breaker in KOSPI history, and the recent volatility phase is so unusual that half of them have been triggered this year.

Foreign investors were the main drivers of the index plunge. Foreigners net sold 3.7 trillion won worth of the bellwether stock Samsung Electronics (KOSPI: 005930) in just one day. Foreigners maintained a net selling advantage in the KOSPI spot market for 13 consecutive trading days, increasing their cumulative net selling volume to 41.9 trillion won. On this day, the won-dollar exchange rate closed at 1,514.9 won, down 13.8 won from the previous day based on 24-hour integrated trading. News of cooperation between South Korean and Japanese foreign exchange authorities and estimated smoothing operation volumes dragged the exchange rate down, but the decline was somewhat reduced during the night due to a stronger dollar triggered by the Hormuz situation.

It was a day when the surge in U.S. Treasury yields and geopolitical risks originating from Iran led to an avoidance of IT assets within emerging markets. The KOSPI's 12-month forward price-to-earnings ratio (12MF PER) dropped below 6.7 times, approaching the low of the year (6.65 times). This is the lowest level since the low during the 2008 global financial crisis (6.27 times), suggesting that a volatile market linked to macroeconomic variables will likely continue until the short-term selling panic subsides.

Key Issues and Insights by Industry

Semiconductors and Information Technology (IT) Devices

Samsung Electronics disclosed record preliminary earnings for the second quarter of 2026 with 171.0 trillion won in revenue (up 129% year-on-year, up 28% quarter-on-quarter) and 89.4 trillion won in operating profit (up 1,812% year-on-year, up 56% quarter-on-quarter). This is the result of the memory semiconductor division driving earnings growth by recording an operating profit of around 92 trillion won. However, more than 16 trillion won in performance bonus-related provisions were reflected, and excluding this, the operating profit based on the core business is estimated at around 106 trillion won. The non-memory (System LSI/Foundry) division posted an operating loss of 2.4 trillion won, and the Mobile and Home Appliance (DX) division also recorded a deficit of 1.0 trillion won, falling short of market estimates. Despite the record earnings announcement, Samsung Electronics' stock price closed down 6.92% due to concentrated selling by foreigners amid concerns about peak profits. SK Hynix (KOSPI: 000660), another pillar in the sector, also plummeted 6.06%, failing to avoid the macro selling pressure. Nevertheless, memory semiconductor spot prices maintained a strong flat trend, with DDR4 8Gb spot prices rising 0.82% daily to $30.6 and DDR5 16G prices rising 0.14% to $47.067. This implies that the stock price drop was due to a macro supply and demand twist rather than a slump in industry conditions.

Power Grid and Clean Energy Infrastructure

The power transmission and distribution and energy equipment industry demonstrated solid order momentum backed by infrastructure investment demand from global big tech companies. HD Hyundai Electric (KOSPI: 267260) signed a data center power infrastructure supply contract worth up to approximately 1.1 trillion won with a global big tech company. The volume is scheduled to be delivered sequentially by 2028, and accordingly, HD Hyundai Electric raised its annual order guidance for 2026 by 23.8% from the previous $4.2 billion to $5.2 billion. In the hydrogen fuel cell sector, the fair value of Doosan Fuel Cell (KOSPI: 336260) was also revised up by 17% to 76,000 won amid prospects for stronger order momentum. In the U.S. market, on-site power generation demand for data centers continues, as seen when Bloom Energy expanded its partnership scale with Brookfield by five times from $5 billion to $25 billion. With the global power distribution equipment market projected to grow to a 312 trillion won scale by 2033, it is analyzed that the long-term earnings visibility of domestic power infrastructure companies has further solidified.

Shipbuilding and Defense

News that Hanwha Ocean (KOSPI: 042660) failed to win the final order in the Canadian Patrol Submarine Project (CPSP) prompted selling across the shipbuilding and defense sectors, and Hanwha Ocean plunged 22.65% on the day. However, the earnings improvement trend in the equipment sector remains valid. The Q2 consolidated revenue of ship engine manufacturer Hanwha Engine (KOSPI: 082740) is estimated at 371.5 billion won (down 4.2% year-on-year) and operating profit at 55.8 billion won (up 65.2% year-on-year). Although slightly below market expectations (60.4 billion won), its strength lies in securing a total engine order backlog of 5.3 trillion won by achieving at least 1.8 trillion won in new orders in the first half alone. Given that it is unrelated to the Canadian submarine value chain, some analyses suggest that this correction is rather a buying opportunity.

Market Signals

• Hyundai Motor's Earnings Slowdown: Hyundai Motor (KOSPI: 005380)'s Q2 2026 consolidated revenue is projected to be 47.2 trillion won (down 2.2% year-on-year) and operating profit is projected to be 2.83 trillion won (down 21.4% year-on-year), which is analyzed to fall short of market expectations (revenue of 49.7 trillion won, operating profit of 3.21 trillion won). Global wholesale volume decreased to 990,000 units (down 7.1% year-on-year) due to production disruptions caused by a fire at a supplier, and the cumulative foreign currency debt revaluation cost of 400 billion won in the first half pressured profitability.

• LG Electronics Beats Q2 Operating Profit Consensus: It is analyzed that LG Electronics (KOSPI: 066570)'s Q2 operating profit significantly exceeded the market consensus, driven by tariff refund effects, strong performance by LG Innotek, and profitability improvement in the media and entertainment division. Revenue on a separate basis is estimated at 18.5203 trillion won (+9.3% YoY) and operating profit at 1.3511 trillion won (+117% YoY).

• SK Hynix ADR Public Offering Success: It is reported that massive subscriptions from global institutional investors flocked to the public offering of SK Hynix American Depositary Receipts (ADRs) ahead of their listing on the 10th. This acted as the background for the U.S. semiconductor sector to narrow its decline late in the session yesterday.

• Cosmax Accelerates Global Growth: Cosmax (KOSPI: 192820)'s Q2 operating profit is expected to meet the market consensus (69.2 billion won) at 69.0 billion won, an increase of 13.4% from the same period last year. Separate revenue growth focused on skincare and the high growth of its U.S. subsidiary are supporting the earnings.

Epoch View: Investment Implications

The military tension in the Strait of Hormuz and the stimulation of inflation expectations induced a prolonged high interest rate environment, triggering risk aversion across global assets. The KOSPI index dropping 4.91% in a single day and triggering a circuit breaker shows that domestic large-cap information technology (IT) stocks became targets for liquidity withdrawal during the global capital reallocation process. The fact that foreigners drained 3.7 trillion won in a single day from Samsung Electronics alone is interpreted as a mechanical portfolio weight reduction trend due to macroeconomic anxiety rather than fundamental damage.

However, despite the market panic, the fundamental earnings generation capability of major domestic companies remains intact. The bargaining power of South Korean manufacturers within the hardware supply chain is valid, as seen when Samsung Electronics recorded a Q2 operating profit of 89.4 trillion won, beating market expectations, and HD Hyundai Electric secured a 1.1 trillion won order from a global big tech company. The current moment, when the KOSPI's 12MF PER has sunk to its lowest level since the financial crisis, signifies an entry into an 'oversold zone' driven by macroeconomic shocks. Rather than being shaken by short-term supply and demand distortions, it is effective to compress portfolios around key hardware companies such as power transmission and distribution infrastructure with solid global order backlogs and strong profit generation capabilities, and shipbuilding equipment where earnings improvements have been confirmed.

This content was generated by News Epoch's proprietary AI algorithm, which tracks and analyzes public data from research centers of major domestic brokerages and global financial media in real time. We clarify that this is an objective summary based on collected data and does not constitute an investment solicitation or recommendation for specific stocks.