[R&E] KOSPI Plummets 5.72% on 3 Trillion Won Net Selling by Foreigners; Large-Cap Chip Stocks Weaken on US-Iran Tensions and Oil Pressures

[R&E: Research & Epoch] This is News Epoch's signature report that provides a view of a new era of investment by integrating and analyzing global financial data and domestic securities firms' research.

Global Market Brief

Last Friday, the New York stock market closed mixed as supply and demand diverged between traditional industrial and technology stocks. The Dow Jones Industrial Average rose +0.46% from the previous trading day to 51,947.25 points, and the S&P 500 index edged up +0.05% to 7,411.98 points, ending slightly higher. In contrast, the tech-heavy NASDAQ Composite Index fell -0.64% to close at 24,975.82 points. The Philadelphia Semiconductor Index plunged -4.25%, with semiconductor stocks such as Micron (-7.0%) and Intel (-7.9%) leading the decline. By sector, telecommunications (+4.93%), real estate (+2.34%), and consumer staples rose, whereas semiconductors and semiconductor equipment (-2.83%) and automobiles and components (-1.54%) fell.

The U.S. weekly initial jobless claims announced the day before hit their lowest level in about 57 years, which was interpreted as a signal that employment remains solid; this fueled concerns of prolonged monetary tightening, pushing the 10-year U.S. Treasury yield above the 4.7% mark. However, international oil prices fell by about 3% as the possibility of resumed negotiations between the U.S. and Iran was highlighted, reversing some of the previous day's sharp gains. The market maintained a wait-and-see approach ahead of big tech earnings and the July FOMC (28th-29th) scheduled for this week.

Domestic Market Summary

Geopolitical risks originating from the Middle East and massive net selling by foreigners pressured the domestic financial market. Last Friday, the KOSPI closed at 6,690.62 points, down -5.72% from the previous trading day, and the KOSDAQ also fell -5.32% to 748.22 points, triggering sell sidecars in both markets. In the KOSPI market, foreigners turned to net sellers after five trading days, dumping more than 3 trillion won in spot stocks and driving the index down.

In addition to escalating Middle East tensions caused by an attack on an oil tanker in the Red Sea and President Trump's remarks about considering large-scale strikes on Iran, the fact that U.S. weekly initial jobless claims hit a 57-year low highlighted upward pressure on interest rates, thereby stimulating risk aversion. Furthermore, trade burdens increased as the temporary 10% global tariffs that ended on July 24 were replaced with new tariffs of 10 to 12.5% for 60 trading partners, and a 12.5% tariff was also applied to South Korea.

In the Seoul foreign exchange market, the KRW/USD exchange rate closed at 1,466.60 won, down from the previous trading day. Expectations of dollar supply due to the listing of SK Hynix's American Depositary Receipts (ADR) and a calming of foreign net equity selling supported the strength of the won. The domestic stock market is analyzed to continue exhibiting high volatility ahead of major events this week, including Samsung Electronics and SK Hynix's earnings, U.S. big tech earnings, and the FOMC.

Key Industry Issues and Insights

Automobiles and Mobility: Tariff Burdens Materialize Amid Q2 Earnings Announcements

As core companies in the domestic automotive value chain released their second-quarter earnings last week, trade pressures began to be reflected in their performance. Hyundai Motor(KOSPI: 005380) recorded consolidated revenue of 49.2153 trillion won in the second quarter, growing +1.9% year-on-year to reach a record quarterly high, but operating profit decreased by -20.8% year-on-year to 2.8508 trillion won. Its operating profit margin stood at 5.8%, down -1.7%p from the same period last year. In addition to production disruptions due to rising raw material prices and a fire at a parts supplier, the U.S. tariff burden amounted to 900 billion won (0.9 trillion won), directly eroding profitability.

Kia(KOSPI: 000270) continued its top-line growth, recording revenue of 33.3711 trillion won (+12.6%), but operating profit fell -4.9% year-on-year to 2.6286 trillion won, missing market expectations (2.79 trillion won). Even though global hybrid vehicle (HEV) sales surged to 178,000 units (+60%), an increase in price incentives (-0.72 trillion won) and exchange rate valuation losses on sales warranty provision liabilities (-0.37 trillion won) hindered performance.

Parts supplier Hyundai Mobis(KOSPI: 012330) exceeded consensus with revenue of 16.3247 trillion won (+2%) and operating profit of 975.2 billion won (+12%). The operating profit margin of its A/S division improved to 27.8%, driving earnings, but 24 billion won in losses related to an India plant fire and a 61 billion won burden from rising semiconductor costs pressured the indicators. Hyundai Wia(KOSPI: 011210) also missed consensus with an operating profit of 50.4 billion won (-11%), and Hyundai Glovis(KOSPI: 086280) was limited to an operating profit of 495.1 billion won (-8%) due to declining profits in the shipping and logistics sector. As the automotive industry's earnings capacity enters a slowdown phase, it demonstrates that protectionist tariff pressures are being transferred into tangible costs.

Power Equipment and Infrastructure: Continued Downstream Demand from AI Data Centers

The demand for power equipment driven by the replacement of aging power transmission and distribution networks and the expansion of artificial intelligence (AI) data centers is being verified by earnings results. LS ELECTRIC(KOSPI: 010120) reported second-quarter revenue of 1.5770 trillion won, up +32% year-on-year, and operating profit rose +64% to 178.5 billion won, both reaching record quarterly highs. New orders in the second quarter amounted to 2.1 trillion won, with the order backlog reaching a record high of 7.0 trillion won, expanding the possibility of raising the annual order target to 6-6.5 trillion won.

The trickle-down effect is also spreading to parts suppliers. Samsung Electro-Mechanics(KOSPI: 009150) earlier signed a supply contract worth approximately 300 billion won for multilayer ceramic capacitors (MLCCs) for AI servers with a global big tech company, diversifying its high value-added components portfolio. This demonstrates that domestic power and components companies are establishing themselves as core suppliers for global power grid reconstruction and AI infrastructure investments.

Pharmaceuticals and Biotech: A Combination of Solid Earning Power and Aggressive M&A

Biosimilar and CDMO bellwether Samsung Biologics(KOSPI: 207940) proved its overwhelming cash-generating ability despite cost pressures, surging +10.1% during last Friday's market plunge. Second-quarter consolidated revenue grew +30.2% year-on-year to 1.3209 trillion won, and operating profit increased +23.0% to 586.4 billion won.

The future expansion trend is also concrete. It expanded its business territory by acquiring a 56% stake in the Swiss peptide pharmaceutical CDMO specialist Polypeptide for 2.7 trillion won, and also previewed the construction of Plant 6. The low-debt structure, consisting of 2.1886 trillion won in cashable assets and 965.3 billion won in total borrowings (a borrowing ratio of 11.5%) at the end of the second quarter, serves as a funding foundation for large-scale acquisitions.

IT and Semiconductors: Clash Between Record Long-Term Supply Cooperation and Macro Downward Pressure

Domestic large-cap semiconductor stocks saw their share prices decline due to macro deterioration, despite news of massive long-term supply cooperation. Over the weekend at the San Francisco AI Summit, SK Hynix(KOSPI: 000660) announced a 5-year, $750 billion letter of intent (LOI) for long-term memory supply with big tech companies such as NVIDIA and Microsoft, while Samsung Electronics(KOSPI: 005930) announced a 5-year, $200 billion memorandum of understanding (MOU) with Broadcom for memory and foundry cooperation. However, amid last Friday's KOSPI downturn, Samsung Electronics dropped -7.6% and SK Hynix fell -8.3%, failing to overcome macro pressures.

In the materials, components, and equipment sector, PSK(KOSDAQ: 319660) has solid earnings fundamentals, with projected 2026 consolidated revenue of 681.1 billion won (+49.0%) and operating profit of 185.9 billion won (+110.0%). Based on its No. 1 position in the global dry strip equipment market, it continues to benefit from capital expenditure (CapEx) execution by major memory manufacturers, yet this was not enough to defend against the downward pressure from global capital outflows.

Market Signals

• Sell Sidecars Triggered in Both Markets: Last Friday (July 24), as both the KOSPI and KOSDAQ declined, sell sidecars were triggered in both markets. Out of 101 KOSPI sidecars since 2002, 41 have occurred this year, with sells holding a slight edge at 20 buys and 21 sells. In July alone, they were activated 12 times (5 buys, 7 sells) out of 17 trading days.

• Solid U.S. Employment & Interest Rate Hike Sentiments: Weekly initial jobless claims recorded 187,000, coming in below the market estimate (212,000) and marking the lowest level in about 57 years. The solid employment signal highlighted tightening concerns, reflecting a roughly 35% probability of an interest rate hike at this week's FOMC (28th-29th) based on the FedWatch Tool.

• Dongkuk Steel Standalone Earnings Turnaround: Dongkuk Steel(KOSPI: 460860) posted second-quarter standalone revenue of 995.5 billion won, a +11.4% increase year-on-year, and operating profit surged +52.3% to 45.6 billion won, significantly beating the consensus (33.7 billion won). A sharp increase in sales of rebar and section steel and heavy plates drove the performance.

• Korea Zinc Financing for Tennessee Project: JPMorgan proposed a $2.35 billion (approximately 3.5 trillion won) syndicated loan to the domestic financial sector for the financing of Korea Zinc(KOSPI: 010130)'s integrated smelter project in Tennessee, U.S. (totaling $7.4 billion).

Epoch View: Investment Implications

The global financial market has been put to the test by prolonged monetary tightening and trade friction. Amid overlapping overheating of U.S. employment indicators and geopolitical risks in the Middle East, the new tariffs act as an immediate threat to the earnings of large South Korean manufacturers that heavily depend on exports.

Although individual fundamentals, such as SK Hynix's large-scale long-term supply cooperation or LS ELECTRIC's record earnings, remain solid, in a phase of expanding macroeconomic uncertainty, cost control and the health of cash flows become key measures of stock price defensive power, rather than simple top-line growth. It is a time when conservative risk management is crucial until the results of Samsung Electronics and SK Hynix's earnings and the FOMC are confirmed this week.

This content was generated 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 collected data and does not constitute a solicitation or recommendation to invest in any specific stock.