[R&E] KOSPI Plummets 5.98%, Circuit Breakers Triggered for Second Consecutive Day; Large-Cap Semiconductor Stocks Weaken Together on SK Hynix Earnings Miss

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

Global Market Brief

The US Federal Reserve (Fed)'s hawkish interest rate freeze and the surge in energy prices following the resurgence of geopolitical risks have strongly stimulated volatility in global financial markets. In the New York stock market the previous day, the blue-chip Dow Jones Industrial Average closed at 51,594.14 points, down -2.19% from the previous trading day. The large-cap S&P 500 index fell -1.52% to 7,316.15 points, and the technology-heavy Nasdaq Composite Index dropped -1.74% to 24,442.94 points. This is the result of the Fed's hardline stance on controlling inflation and the surge in bond yields putting strong profit-taking pressure on risk assets overall, including technology stocks.

In fact, the policy interest rate was frozen in the range of 3.50~3.75% through the Federal Open Market Committee (FOMC) meeting, but hawkish tension rose as three policymakers offered a minority opinion demanding a 25bp increase. Fed Chair Kevin Warsh reaffirmed the tightening monetary policy stance during a press conference by stating that a flexible implicit inflation target does not exist for the Fed. Consequently, the US 30-year Treasury bond yield surpassed 5.2%, the highest level since 2007, and the 10-year Treasury bond yield also recorded 4.6773%, up 7.1bp from the previous day. Additionally, as concerns over military conflicts in the Middle East resurfaced, the price of West Texas Intermediate (WTI) crude oil closed at $84.46 per barrel, surging +6.56% from the previous day, while Brent crude oil skyrocketed +7.91% to $90.74. The simultaneous occurrence of high interest rates and high oil prices directly transferred downward pressure to the domestic asset market through a path that exacerbates the manufacturing cost burden for global companies and raises the cost of equity (COE).

Domestic Market Overview

The domestic financial market the previous day experienced a severe stock price correction as a semiconductor sell-off due to SK Hynix's Q2 earnings failing to meet expectations coincided with a simultaneous sell-off by foreign and retail investors. The KOSPI index closed at 5,663.24 points, down -5.98% from the previous trading day. At one point during the session, it fell to the 5,200 level. The KOSDAQ index also plunged -6.12% to 662.68 points. Due to the decline on this day, circuit breakers were triggered simultaneously in the KOSPI and KOSDAQ markets for the second consecutive day, leaving the first-ever historical record. Foreign and retail investors executed simultaneous net selling in the KOSPI market, increasing downward pressure, while low-point buying by pension funds and private equity partially reduced the decline.

In the Seoul foreign exchange market, the KRW/USD exchange rate closed at 1,442.1 won, down 10.5 won from the previous day, and the offshore 1-month NDF exchange rate recorded 1,441.6 won. The slight recovery in the value of the won was attributed to the foreign exchange authorities' vigilance toward intervention to defend the exchange rate and the strength in the government bond market. The domestic 3-year government bond yield closed at 3.794%, down from the previous day, responding to macro volatility. The domestic stock market opening today is analyzed to probe the possibility of an influx of rebound buying following its entry into a cumulative technical oversold territory. However, due to lingering vigilance that concerns over the prolonged high interest rates in the US and the trend of high oil prices could damage margins in the real economy, it is highly likely that stock price differentiation will proceed based on margin defense capability by sector rather than a full-fledged index rebound.

Key Industry Issues and Insights

Semiconductors and IT Components: Earnings Below Consensus and Full-Fledged Competition in Next-Generation Glass Substrate Technology

Indicators of the profit-generating capability of domestic large-cap semiconductor stocks failed to meet market expectations, triggering a stock price correction. SK Hynix(KOSPI: 000660) reported Q2 consolidated revenue of 79.3 trillion won (+51% QoQ, +257% YoY) and an operating profit of 60.5 trillion won (+61% QoQ, +561% YoY), continuing a trend of record-high profits for five consecutive quarters, but fell slightly short of the market consensus. Sales in the high bandwidth memory (HBM) for servers and eSSD sectors more than doubled compared to the previous quarter, sustaining high growth, while the operating profit margin (OPM) for DRAM approached 80.0% (estimated) and NAND approached 66.0% (estimated). Although a non-operating profit of 62 trillion won was temporarily reflected, recording a pre-tax profit of 123 trillion won, and cash reserves were secured up to 88 trillion won, an increase from the previous quarter (54 trillion won), the stock price underwent a -9.61% correction upon the assessment that it failed to satisfy heightened market expectations.

On the other hand, in the lower supply chain value chain and design sectors, the improvement of profit fundamentals and the achievements of technological cooperation are encouraging. Semiconductor inspection equipment specialist Koh Young(KOSDAQ: 098460) achieved record-high profits, beating the consensus with Q2 revenue of 88.8 billion won (+70.4% YoY) and an operating profit of 14.6 billion won (+479.1% YoY). Sales of 3D AOI and SPI equipment for servers drove earnings growth at 34.2 billion won (+159.9% YoY), and the sales performance of three brain surgery robots was reflected for the first time. IP video specialist Chips&Media(KOSDAQ: 094360) posted Q2 revenue of 7.1 billion won (+7.1% YoY), but due to one-off expenditures such as labor and consulting costs, operating profit remained at 1.1 billion won (-18.1% YoY), falling short of the consensus. However, royalty revenue increased for four consecutive quarters, demonstrating solid fundamental strength. In addition, the move by Samsung Electro-Mechanics(KOSPI: 009150) to embark on the joint development of semiconductor glass substrate materials—encompassing etching, plating, and polishing processes—with precision chemical company Soulbrain, and Absolics initiating a glass substrate package level evaluation in Taiwan, suggests that the internalizing of technology to secure market dominance in next-generation components is accelerating.

Energy and Eco-friendly: Establishing a Recurring Surplus Structure Beyond Tax Credits and One-off Profits

Eco-friendly infrastructure industries such as solar and hydrogen have entered a phase of proving their recurring fundamental strength, surpassing one-off costs and subsidy effects. Hanwha Solutions(KOSPI: 009830) achieved an earnings surprise that beat the market consensus (187.8 billion won) by 63%, recording Q2 consolidated revenue of 4.5827 trillion won (+47% YoY, +18% QoQ) and an operating profit of 306.5 billion won (+200% YoY, +231% QoQ). The Advanced Manufacturing Production Credit (AMPC) of 214 billion won under the US Inflation Reduction Act (IRA) and a US tariff refund of 90 billion won were the main drivers of the earnings improvement; however, excluding these, the recovery trend in the recurring operating profit of the renewable energy sector was also evident. Solar module shipment volume in the US declined by about 32% QoQ to 1.3GW, but the average selling price (ASP) rose +5% due to an improved sales mix of high-margin residential products, defending the margin rate. The completion of the quadruple-benefit structure spanning ingots, wafers, cells, and modules through the start of mass cell production at the Cartersville plant in the US in June is analyzed to serve as a bridgehead for stable AMPC cash inflows in the future.

A similar profit growth trend was also proven in the global eco-friendly components market. Hydrogen fuel cell manufacturer Bloom Energy significantly exceeded the consensus ($826 million) by recording Q2 revenue of $1.07 billion (+166% YoY). The operating profit margin entered the 20% range, making the surplus trend clear, and the annual revenue guidance was revised upward from the previous $3.4~3.8 billion to $3.9~4.2 billion. This demonstrates that eco-friendly power infrastructure investments are not just a one-off boom but are undergoing a structural market change, being adopted as a constant main power source for large data centers and industrial buildings.

Shipbuilding and Machinery Heavy Industry: Maximizing Profitability Through Improved High-Value Ship Construction Mix

The shipbuilding and heavy industry sectors are enjoying a structural margin upturn period as the mix of rising ship prices, which has continued for several years, enters the actual construction stage. HD Korea Shipbuilding & Offshore Engineering(KOSPI: 009540) posted Q2 consolidated revenue of 8.927 trillion won (+20.2% YoY) and an operating profit of 1.6451 trillion won (+72.5% YoY), beating market expectations by approximately 11%. This is the result of the key subsidiary HD Hyundai Heavy Industries(KOSPI: 329180) leading the company-wide earnings by achieving a commercial vessel margin rate of 17.8%, boosted by an increase in working days and the effects of rising ship construction prices and exchange rates. First-half new orders also reached $16.38 billion, achieving 96.2% of this year's commercial vessel order target ($17.02 billion) early, thereby increasing long-term earnings visibility. Engine component specialist HD Hyundai Marine Engine (KOSPI: 071970) also recorded Q2 revenue of 128.1 billion won (+29.1% YoY) and an operating profit of 31.3 billion won (+79.2% YoY, OPM 24.4%). Although revenue in the engine sector was partially deferred due to adjustments in the delivery schedule, the volume of captive turbochargers, a high-profit business, increased, supporting the downside of the profit margin.

The margin improvement speed of Hanwha Ocean(KOSPI: 042660) also exceeded market expectations. It achieved earnings that surpassed the consensus by 38.0%, with Q2 consolidated revenue of 5.4432 trillion won (+65.2% YoY) and an operating profit of 736.1 billion won (+98.0% YoY). The commercial vessel division's OPM reached 22.7%, proving that a recurring profit structure has been established, and 1.5 trillion won in revenue from the delivery of the P-79 FPSO project in the offshore plant division was reflected at once, driving a jump in consolidated earnings. The benefits of rising ship prices, coupled with increased utilization rates and construction efficiency, are translating into substantial cash flow improvements.

Market Signals

• SK Hynix Record High Operating Profit: Achieved Q2 operating profit of 60.5 trillion won (+61% QoQ), breaking the record for the 5th consecutive quarter, but slightly below the market consensus

• Hanwha Solutions Earnings Surprise: Q2 operating profit of 306.5 billion won (+200% YoY), beating market forecasts by 63%, benefiting from the Advanced Manufacturing Production Credit (AMPC) following the full-scale operation of the US Cartersville plant

• HD Korea Shipbuilding & Offshore Engineering Structural Turnaround: Q2 consolidated operating profit of 1.6451 trillion won (+72.5% YoY), influenced by the expansion of the high-value ship construction portion of its subsidiary HD Hyundai Heavy Industries

• US Long-Term Treasury Bond Yield Surge: Despite the July FOMC policy rate freeze, the emergence of a minority opinion of three for an increase and the policy to maintain a tightening stance pushed the US 30-year Treasury bond yield past 5.2%, the highest since 2007

• Domestic Dual Index Circuit Breakers Triggered Simultaneously: KOSPI -5.98%, KOSDAQ -6.12% plunges triggered circuit breakers in both markets simultaneously for two consecutive days, setting a first-ever historical record

Epoch View: Investment Implications

The resumption of geopolitical conflicts, the surge in oil prices, and the hawkish freeze tension of the US Federal Reserve are severely testing the downside support of valuations in the domestic financial market. The triggering of circuit breakers and sharp index drops for two consecutive days are the result of contracting macro sentiment combined with earnings disappointments from leading semiconductor stocks. In this phase of extreme volatility, the reference point for investment should not be emotional agitation, but rather the 'cost control capability' and 'recurring margin defense strength' of individual companies. As seen from SK Hynix missing the consensus, the market wants clear margin proof rather than simple top-line growth. It is highly suggestive that Hanwha Solutions has established a recurring surplus foundation even after stripping away policy subsidy factors, and that HD Korea Shipbuilding & Offshore Engineering has started to translate rising ship prices into profit margins. During this transitional period where indiscriminate discounting of asset values proceeds due to macro shocks, the profit gap between companies that create cash flows by passing cost increase factors onto selling prices and those that cannot is analyzed to widen further. The main game will be rewritten from the point when external environmental factors clear and the true profit margins of individual companies are revealed.

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. We clarify that this is an objective summary based on collected data, and not a solicitation or recommendation for investment in specific stocks.