[R&E] KOSPI Surges 17.91% on Record-High 7.2 Trillion Won Net Buying by Foreigners, Driven by Massive Inflows into Large-Cap Semiconductor Stocks like Samsung Electronics and SK Hynix

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

Global Market Brief

The U.S. New York stock market closed higher, driven by the strong earnings fundamentals of big tech companies and the trend of expanding investments in artificial intelligence (AI) infrastructure. As of the close on July 31, the blue-chip-heavy Dow Jones Industrial Average recorded 52,485.03 points, up +0.53% from the previous trading day. The large-cap-centric S&P 500 index rose +0.70% to finish at 7,489.72 points, and the tech-heavy Nasdaq Composite Index climbed +1.00% to close at 25,373.85 points. The Philadelphia Semiconductor Index, which serves as a bellwether for the semiconductor sector, also closed slightly higher by +0.07% at 11,311.08 points. Notably, Nvidia rose +2.93%, reclaiming its position as the top global company by market capitalization. Amazon, which announced large-scale capital expenditure (CAPEX) plans, jumped +15.32%, and Microsoft soared +3.02%, leading the index's upward momentum. In contrast, Apple fell -7.35% affected by the forecast of slowing sales growth due to component supply constraints for the July-September period.

On the macroeconomic indicators front, government bond yields continued their upward trend despite a softening of inflation concerns. The U.S. core Personal Consumption Expenditures (PCE) price index for June rose +0.1% month-on-month, coming in below the market expectation of +0.2%. However, as the U.S. Employment Cost Index (ECI) for the second quarter recorded 0.9%, exceeding expectations, the bond market reacted with wariness over prolonged tightening. Consequently, the U.S. 10-year Treasury yield surpassed 4.73%, and the 30-year Treasury yield exceeded 5.27%, soaring to the highest levels since the global financial crisis. In the foreign exchange market, as the U.S. Treasury intervened to buy the yen in coordination with Japanese authorities, the yen/dollar exchange rate fell to 157.4 yen, showing a slight recovery in the yen's value. Despite the easing of geopolitical risks, international oil prices rose, with West Texas Intermediate (WTI) crude closing at $84.67 per barrel and Brent crude at $87.93 per barrel.

Domestic Market Overview

On July 31, the domestic financial market experienced an unprecedented explosive rally as record-breaking buying demand flowed in. The KOSPI index recorded 6,595.45 points, skyrocketing +17.91% from the previous trading day, setting new all-time records for daily growth rate and points gained. The KOSDAQ index also surged +11.63% to close at 719.76 points. Due to the extreme market volatility, buy-side sidecars were triggered in both the KOSPI and KOSDAQ markets, temporarily suspending the execution of program buying orders. It was a record-breaking day with index futures also touching the upper limit during intraday trading.

The core of the supply and demand in the securities market was foreign investors. Foreigners net bought 7.2 trillion won worth of stocks in the regular KOSPI market alone, breaking the record for the highest daily net buying in history. However, the net buying was heavily concentrated on large-cap semiconductor stocks such as SK Hynix (approximately 3.65 trillion won) and Samsung Electronics (approximately 2.1 trillion won), suggesting it was more of a recovery from the abnormal selling pressure formed during the recent plunge rather than a trending inflow of new capital. Conversely, retail investors poured out massive profit-taking sell-offs, taking advantage of the index surge. In the Seoul foreign exchange market, the won-dollar exchange rate showed an upward trend from the previous day, closing at 1,435.3 won. Amid a strong won trend where the exchange rate fell by more than 100 won throughout July, the massive inflow of foreign capital acted as downward pressure on the exchange rate. Today (August 3), the domestic regular market is highly likely to continue a solid trend, inheriting the positive macro environment such as the tech stock rally in the New York market late last week and the stabilization of oil prices. However, liquidity fluctuation factors, such as the renewed peak of U.S. long-term Treasury yields and the volume of forced liquidations emerging in the process of shrinking retail margin debt balances, are analyzed to induce a differentiated market by sector.

Key Industry Issues and Insights

Semiconductors and IT Components: The Power of Confirmed Earnings from Samsung Electronics and SK Hynix, Which Recorded Historic Growth Rates

Major domestic semiconductor companies completely dispelled market concerns about their profit-generating capabilities by announcing record-breaking confirmed earnings. Samsung Electronics (KOSPI: 005930) soared +26.8% last Friday, recording its highest-ever daily return. The company proved its record-high performance by achieving consolidated sales of 171.5 trillion won (+130.0% YoY) and an operating profit of 89.5 trillion won (+1,812.0% YoY) in the second quarter. The Device Solutions (DS) division, which is in charge of the semiconductor business, alone generated 89.2 trillion won in operating profit, driven by the Average Selling Prices (ASP) of DRAM and NAND rising by +49% and +58%, respectively, compared to the previous quarter. SK Hynix (KOSPI: 000660) surged +29.95% last Friday, hitting the upper limit for the first time in its history. The company continued its streak of record-breaking earnings for five consecutive quarters with a second-quarter operating profit of 60.5 trillion won, and increased its net cash balance to 69 trillion won. This suggests that the supply bargaining power and pricing power held by Korean large-cap semiconductor stocks in the High Bandwidth Memory (HBM) and server-oriented high-capacity memory markets remain solid.

In the substrate sector, the earnings improvement trend was also clearly evident. Daeduck Electronics (KOSPI: 353200) recorded second-quarter sales of 401 billion won (+63.1% YoY) and an operating profit of 70.3 billion won (+3,662.0% YoY), exceeding the market consensus. As package substrates become more multi-layered due to the advancement of artificial intelligence (AI) performance, the utilization rate of high value-added Flip Chip Ball Grid Arrays (FC-BGA) reached 90% as of the end of June. This proves that investments in AI data center infrastructure are driving the structural growth of the downstream component supply chain.

Secondary Batteries: Large-Cap Battery Stocks Begin Transition to Profitability in Earnest

Domestic battery manufacturers have recovered their profit fundamentals based on cost improvements and subsidy benefits despite concerns over a chasm. LG Energy Solution (KOSPI: 373220) recorded second-quarter sales of 7.6 trillion won (+25.0% YoY) and an operating profit of 113.3 billion won (-77.0% YoY), turning a profit compared to the previous quarter for the first time in three quarters. Samsung SDI (KOSPI: 006400) also achieved second-quarter sales of 3.8 trillion won (+19.0% YoY) and an operating profit of 203.8 billion won, successfully returning to profitability on both a year-on-year and quarter-on-quarter basis for the first time in two years. The benefits of the Advanced Manufacturing Production Credit (AMPC) under the U.S. Inflation Reduction Act (IRA), along with an improved product mix in the Energy Storage System (ESS) and small battery divisions, are analyzed as the key drivers behind achieving this surplus. This demonstrates that leading domestic battery companies, which possess high-efficiency battery packs and high value-added material lineups, are re-securing earnings visibility even amidst a gradual slowdown in global EV demand.

Defense and Aerospace: Hanwha Aerospace Surpasses 1 Trillion Won in Quarterly Operating Profit for the First Time in History

The defense sector has entered a period of record-high earnings as the delivery of export volumes accelerates amid global geopolitical tensions. Hanwha Aerospace (KOSPI: 012450) reported second-quarter consolidated sales of 9.2929 trillion won (+47.0% YoY) and an operating profit of 1.3655 trillion won (+59.0% YoY), breaking the 1 trillion won barrier in operating profit for the first time on a quarterly basis. With large-scale deliveries in the land defense sector concentrated, such as K9 self-propelled howitzers and Chunmoo bound for Poland, the operating profit of the land defense division reached 533 billion won. The company's total order backlog stands at approximately 38 trillion won, securing work stability for over three years. Hyundai Rotem (KOSPI: 064350) also recorded second-quarter sales of 1.606 trillion won (+13.3% YoY) and achieved a defense operating profit margin (OPM) of 24.5% due to the export of K2 tanks to Poland. This implies that the early delivery capability and cost-effectiveness of Korean defense products are serving as core competitive advantages that secure a dominant bargaining position in the global market.

Steel and Non-Ferrous Metals: POSCO Holdings and Poongsan Earnings Surprises and Visibility of New Growth Engines

The raw materials sector posted solid earnings, influenced by an increase in average selling prices and the strong prices of non-ferrous metals. POSCO Holdings (KOSPI: 005490) achieved a second-quarter operating profit of 819 billion won (+15.8% QoQ, +35.0% YoY), exceeding market expectations (729.9 billion won). Despite the factor of main raw material cost hikes, the average selling price of carbon steel rose by 42,000 won per ton, leading to a +28.6% improvement in standalone steel operating profit compared to the previous quarter. In particular, the Argentina lithium subsidiary succeeded in turning a quarterly profit for the first time since commencing operations, marking the start of practical contributions from the new materials business. Poongsan (KOSPI: 103140) also recorded a second-quarter consolidated operating profit of 125.2 billion won (+33.8% YoY), beating market forecasts by 45.6%. This was largely driven by the reflection of 54 billion won in metal gains following the strength in copper prices and an increase in sales volume in the copper and copper alloy division. This proves that the recovery trend in the manufacturing economy and the increasing demand for high value-added specialty steel products are supporting the earnings improvement of the basic materials sector.

Market Signals

• U.S. Treasury Yields Hit Yearly Highs: The U.S. 10-year Treasury yield surpassed 4.73% and the 30-year yield exceeded 5.27%, soaring to the highest levels since the global financial crisis and exacerbating market tightening pressures.

• South Korea's July Exports Mark All-Time High for the Month: South Korea's export value for July recorded $98.89 billion, up +62.8% from the same period last year, setting an all-time high for the month of July, with items other than semiconductors also growing by 26%.

• Dollar-Won Exchange Rate Fluctuation Trend: In the Seoul foreign exchange market, the won/dollar exchange rate closed at 1,435.3 won, rising from the previous day, yet sustained a strong trend overall by falling approximately 23 won over the week.

• Global Big Tech Uprates AI Investments: While the cumulative AI-related CAPEX of the four global big tech companies surpassed $1.1 trillion, their combined investment plans for 2026 have been revised upwards again to $745 billion.

Epoch View: Investment Implications

The record-high net buying of 7.2 trillion won recorded by foreign investors is interpreted as a result of confirming the fundamental strength proven through the announced confirmed earnings of major listed companies. However, considering that the buying spree was concentrated on large-cap semiconductor stocks like SK Hynix and Samsung Electronics, and that foreigners were marginal net sellers in the spot market on a weekly basis, it should also be noted that this bears the character of resolving the abnormal selling pressure from the sudden plunge rather than a trending inflow of new capital. Nevertheless, in a phase where risks of surging interest rates in the global macro environment and supply chain uncertainties persist, it is highly significant that the firm global bargaining power of leading sectors such as memory semiconductors, secondary batteries, and defense was proven through earnings surprises. Ultimately, despite the noise of macroeconomic variables, the core keys that support the market's downside and determine a trending upward curve lie in the actual profit-generating capabilities and shareholder return intensity of individual leading companies possessing solid fundamentals and cutting-edge technological prowess.

This content was generated through News Epoch's proprietary AI algorithm, which tracks and analyzes public data from major domestic securities firm research centers and global financial media in real-time. It is an objective summary based on collected data and does not constitute an investment solicitation or recommendation for any specific stock.