[R&E] KOSPI Plunges 8.95% to Fall Below 7,000 Mark; Kumho Petrochemical and S-Oil Hold Up Well Amid Heightened Geopolitical Risks

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

Global Market Brief

The U.S. stock market closed lower yesterday as renewed geopolitical tensions coincided with concerns over prolonged monetary tightening. The S&P 500 index fell 0.79% from the previous day to 7,515.34 points, while the tech-heavy Nasdaq index closed down 1.55% at 25,873.18 points. The Dow Jones Industrial Average also slipped 0.26% to finish the session at 52,498.64 points. In particular, the Philadelphia Semiconductor Index plunged 4.78%, leading the tech-driven sell-off.

This decline was the result of a combination of renewed armed conflict in the Middle East and hawkish remarks by a Federal Reserve (Fed) official. Tensions escalated as the exchange of airstrikes between the United States and Iran continued, and U.S. President Donald Trump proposed re-blocking the Strait of Hormuz along with a policy to impose a 20% toll on passing cargo. Accordingly, the price of West Texas Intermediate (WTI) crude oil jumped 9.42% from the previous day to close at $78.14 per barrel, re-stimulating inflation concerns. Furthermore, Fed Governor Christopher Waller pointed to the expansion of artificial intelligence (AI) infrastructure as a factor driving core inflation, mentioning that additional tightening should be considered if core prices rise again, which pushed back the market's expectations for an early interest rate cut. The yield on the 10-year U.S. Treasury note rose by 6.3 bps from the previous day to 4.6237%, adding to valuation pressures across the broader asset market.

Domestic Market Summary

The domestic stock market plummeted yesterday as global macroeconomic headwinds accumulated. The KOSPI index closed at 6,806.93 points, down 8.95% from the previous day, plunging below the 7,000 mark for the first time in about two months. The KOSDAQ index also finished the session down 4.55% at 799.36 points. An extreme risk-aversion sentiment dominated the market, with sell-side sidecars and circuit breakers triggered during intraday trading. In the Seoul foreign exchange market, the won-dollar exchange rate rose to the 1,505 won level during the day reflecting anxiety in the offshore market, but reversed its gains later in the session as forward exchange selling by heavy industry companies such as Hanwha Ocean flowed in, closing at 1,497.3 won, down 1.6 won from the previous day.

Global geopolitical instability and the surge in U.S. Treasury yields acted as negative factors for the domestic stock market, which has a high proportion of large-cap export stocks. In particular, investor sentiment toward the semiconductor sector cooled as the Fed assessed in its semiannual monetary policy report that rising prices of advanced IT products driven by expanded AI infrastructure investments are heightening upward pressure on inflation. Foreigners reduced their selling volume to the 1.6 trillion won level just before the market closed, but it was insufficient to defend against the program selling focused on large-cap stocks. As of the current time (09:10) before the market opens, nighttime futures are showing an upward trend of around 0.6%, but shrinking market liquidity and concerns over prolonged tightening are expected to continue capping the upside of the domestic stock market even after the opening bell.

Key Industry Issues and Insights

Semiconductors: The Disconnect Between Large-Cap Plunges Amid Supply Chain Instability and Legacy Price Rebounds

The domestic semiconductor sector was shaken by concerns over reignited global inflation and the Fed's pointing out of AI-driven inflation. Yesterday, Samsung Electronics (KOSPI: 005930) fell 10.70%, and SK Hynix (KOSPI: 000660) also plummeted 15.37%, leading the index decline. This was influenced by the raised possibility of hyperscalers adjusting the pace of their capital expenditures due to concerns over prolonged high interest rates, despite the box-office success of SK Hynix's U.S. ADR. On the other hand, some in the industry forecast that the structural semiconductor supply shortage will last until 2027, and Samsung Electronics is putting all its efforts into production efficiency, such as pulling forward the operational start date of its Yongin semiconductor plant to 2029.

In contrast to the decline in these large-cap stocks, the unit price rebound and performance improvement in the legacy semiconductor market are being proven by the numbers. GigaDevice, a leading legacy semiconductor company in China, recorded provisional sales of 7.3 billion yuan (up 226% year-on-year) and a net profit attributable to controlling shareholders of 5.4 billion yuan (up 1,496% year-on-year) for the second quarter of 2026, exceeding market consensus by 46% and 77%, respectively. This is the result of the average selling price (ASP) of SLC NAND soaring about 5 times and the legacy DRAM ASP jumping about 10 times over the past year. This suggests that the price recovery trend across legacy memory is distinct in addition to high-spec products like High Bandwidth Memory (HBM), and proves the possibility that it will become a mid- to long-term performance support line for the domestic materials, parts, and equipment value chain.

Refining/Chemicals: Oil Price Surge Due to Geopolitical Risks and Differentiation in Petrochemical Performance

The military conflict between the U.S. and Iran and Trump's proposal to blockade the Strait of Hormuz led to a spike in international oil prices, dividing the stock prices and earnings prospects of the refining and chemical sectors. Yesterday, S-Oil (KOSPI: 010950), which is classified as a beneficiary of rising oil prices, rose 5.6%, and SK Innovation (KOSPI: 096770) also climbed 7.1%, showing a differentiated trend in the midst of a bear market. The surge in oil prices is assessed as a driving force that will lead to a short-term improvement in refining margins and bolster refiners' third-quarter profitability.

Within the chemical industry, the presence or absence of portfolio diversification centered on high value-added products divided the earnings. Kumho Petrochemical (KOSPI: 011780) is analyzed to record a consolidated operating profit of 208.4 billion won for the second quarter of 2026, surging 251% quarter-on-quarter and 220% year-on-year. This figure exceeds the market consensus (140.1 billion won) by 49%. This is thanks to the synthetic rubber division recording an operating profit of 89.8 billion won, up 503% from the previous quarter, and the phenol division successfully turning to a surplus with 19.3 billion won. Conversely, concerns over mounting cost burdens are being raised for other petrochemical companies with a high proportion of basic oils, and it is judged that whether they can improve their constitution focusing on high value-added advanced materials will cement polarization within the industry going forward.

Automobiles/Auto Parts: The Task of Constitutional Improvement Amid Partial Strikes and Concerns Over Earnings Slowdown

The domestic automobile industry has entered a period of short-term volatility as the union's initiation of partial strikes and concerns over a second-quarter earnings slowdown coincided. The Hyundai Motor (KOSPI: 005380) labor union commenced a partial strike for two hours per shift over three days from yesterday to the 15th due to difficulties in wage negotiations. Given that a 16-hour strike last year resulted in a production loss of about 300 billion won, a short-term production disruption is inevitable. Furthermore, the estimate for Hyundai Motor's operating profit for the second quarter of 2026 was revised downward to 3.0 trillion won, a 17.1% decrease from the same period last year, revealing the impact of cost burdens and declining wholesale sales.

Parts affiliate Hyundai Wia (KOSPI: 011210) is also expected to fall short of market expectations, with its operating profit for the second quarter of 2026 coming in at only 41.6 billion won, a 26.1% decrease year-on-year. An operating profit decrease of more than 10 billion won annually due to the suspension of engine supplies to the Russian plant in the past acted as a base effect. However, the speed of transition to eco-friendly vehicles is accelerating. In the first half of this year, the proportion of eco-friendly vehicles among new car registrations in South Korea was 50.4%, surpassing the halfway mark for the first time in history.

Market Signals

• KOSPI Drops Below 7,000 Mark: Yesterday, the KOSPI index plunged 8.95% to close at 6,806.93 points, with a sell-side sidecar and circuit breakers triggered simultaneously.

• Surge in International Oil Prices: Due to the U.S.-Iran military conflict and fears of a blockade of the Strait of Hormuz, the price of West Texas Intermediate (WTI) crude oil surged 9.42% from the previous day to $78.14 per barrel.

• Kumho Petrochemical Earnings Surprise: The estimate for Kumho Petrochemical's second-quarter operating profit was tallied at 208.4 billion won, beating the market consensus (140.1 billion won) by 49%.

• Eco-Friendly New Cars Surpass Half of Total Proportion: In the first half of this year, the proportion of eco-friendly vehicles among domestic new car registrations recorded 50.4%, exceeding half for the first time in history.

• 10-Year U.S. Treasury Yield Surges: Due to a Fed Governor's mention of the possibility of further tightening and inflation concerns, the 10-year U.S. Treasury yield rose to 4.6237% (+6.3 bps).

Epoch View: Investment Implications

As global geopolitical risks and concerns over prolonged monetary tightening flowed in simultaneously, the domestic asset market has entered a technical bear market phase. In particular, the Fed explicitly pointing out AI infrastructure expansion as one of the main culprits of inflation is a key factor putting the brakes on the valuation expansion led by big tech that has driven the market thus far. The simultaneous decline of Samsung Electronics and SK Hynix is interpreted as a result of pricing this in in advance. Market interest is now highly likely to narrow from simply aiming at future growth potential to high value-added materials companies that generate solid cash flows and the refining sector that reaps geopolitical reflex benefits. The constitution verification of the KOSPI, which broke below the 7,000 mark, will be put on the right track when this transitional capital movement is completed.

This content was created through News Epoch's proprietary AI algorithm, which tracks and analyzes public data from research centers of major domestic securities firms and global financial media in real time. It is an objective summary based on the collected data, and we clarify that it is not an investment solicitation or recommendation for specific stocks.