[R&E] KOSPI Drops 4.58% on Foreign Selling, LG Uplus and BGF Retail Differentiate with Improved Earnings Amid Semiconductor Weakness

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

Global Market Brief

The US New York stock market closed lower, weighed down by a series of hawkish remarks from Federal Reserve (Fed) officials and the burden of rising Treasury yields. The blue-chip Dow Jones Industrial Average fell 0.85% from the previous day to 53,885.10 points. The large-cap S&P 500 index dropped 0.18% to 7,709.96 points, and the technology-heavy Nasdaq Composite Index closed 0.06% lower at 26,348.35 points. Hawkish comments from officials, including Fed Governor Cook, stimulated vigilance over tightening. It was pointed out that with inflation still exceeding the target, the expansion of artificial intelligence (AI) infrastructure investments is emerging as a new inflationary pressure. In particular, the stance conveyed from within the Fed that key interest rates could be raised if price stabilization is delayed added downward pressure on the market.

In the bond market, the yield on the US 10-year Treasury note rose 6.5 bps from the previous day to 4.678%. The yield on the 2-year note, which is sensitive to monetary policy, also closed 6.4 bps higher at 4.245%, making the upward pressure on interest rates evident. International oil prices rose on concerns over geopolitical supply instability. West Texas Intermediate (WTI) crude futures prices gained 2.8% from the previous day to $77.3 per barrel. The rise in global interest rates and the re-emergence of geopolitical risks served as a direct catalyst exerting capital outflow pressure on emerging market stocks.

Domestic Market Overview

The domestic financial market experienced an index correction as the resurgence of global tightening concerns coincided with massive foreign selling. The KOSPI index closed at 6,296.38 points, down 4.58% from the previous trading day. As foreign selling concentrated in the KOSPI market, a temporary suspension of program selling bids (sell sidecar) was triggered. Large-cap semiconductor stock SK hynix (KOSPI: 000660) fell 10.37% from the previous trading day, and Samsung Electronics (KOSPI: 005930) also dropped 6.30%, leading the index's decline. This was due to the poor earnings guidance from US semiconductor company SanDisk, which reignited concerns about memory industry conditions. On the other hand, the KOSDAQ index showed a mixed trend, closing at 801.67 points, up 0.26% from the previous trading day. The clinical progress momentum of large biotech companies and expectations for earnings improvement in the IT substrate sector supported the bottom of the index.

In the Seoul foreign exchange market, the USD/KRW exchange rate closed at 1,422.9 won, up 1.5 won from the previous trading day amid rising US Treasury yields and risk aversion sentiment. The offshore NDF 1-month exchange rate recorded 1,422.48 won, suggesting a flat start. In the bond market, the 3-year Korea Treasury bond yield rose 6.5 bps from the previous trading day to 3.742%, and the 10-year yield closed 3.9 bps higher at 4.194%, showing weakness. Today's regular domestic market is expected to digest the downward pressure on technology stocks in the US New York stock market and see differentiated supply and demand inflows centered on the information and communications, biotechnology, and consumer goods sectors, where earnings improvements have been proven by numbers.

Key Industry Issues and Insights

Semiconductors & Substrates: Simmtech's Turnaround and Signs of Revival in the Global Component Industry

The memory module and packaging substrate industry has passed the critical point of industry improvement and entered an earnings turnaround phase. Specialized semiconductor printed circuit board (PCB) company Simmtech (KOSDAQ: 222800) recorded consolidated revenue of 514.6 billion won and operating profit of 62.9 billion won in the second quarter. Revenue increased by 51.0% year-on-year, and operating profit surged by a staggering 1,035.3%, exceeding market expectations for profit improvement. With the factory utilization rate improving from the low 80% range in the first quarter to the mid-80% range in the second quarter, the rise in the blended average selling price (Blended ASP) compared to the previous quarter led to an improvement in the cost spread. In particular, the profit contribution from the next-generation memory module (SOCAMM) division, a high value-added product lineup, is expanding rapidly.

This aligns with the overall demand recovery in the global substrate ecosystem. Japan's leading global MLCC company Taiyo Yuden exceeded its revenue guidance with CY2Q26 revenue of 93.9 billion yen (+10.7% YoY) and operating profit of 4.8 billion yen (+53.3% YoY). Omnidirectional sales increases centered on AI servers drove this growth. Nitto Boseki, a supplier of glass fiber, a core substrate material, also recorded a CY2Q26 operating profit of 7.9 billion yen (an 84.8% increase year-on-year), exceeding the consensus by 22.2%. The AI investments and expanded adoption of next-generation substrates by global tech giants prove that the unit price increases and utilization rate recoveries of Korean back-end component companies are not temporary phenomena but a structural turnaround phase.

Pharmaceuticals & Biotech: Commercialization Potential Proven by the High Earnings Growth of SK Biopharmaceuticals and Hugel

Domestic large biotech companies are strengthening their position as a leading sector by directly proving their commercial achievements in the global market with numbers. SK Biopharmaceuticals (KOSPI: 326030) recorded consolidated revenue of 247.4 billion won and operating profit of 97.1 billion won in the second quarter. Compared to the same period last year, revenue and operating profit increased by 40.3% and 56.9%, respectively, continuing a streak of record quarterly earnings. US sales of its core growth driver, the epilepsy treatment Xcopri, increased by 45.6% year-on-year to 224.4 billion won, breaking a new record.

Botulinum toxin specialist Hugel (KOSDAQ: 145020) also recorded an earnings surprise driven by robust exports to the Chinese market. It posted second-quarter revenue of 137.9 billion won and operating profit of 56.0 billion won, exceeding market expectations by 8.7% and 9.4%, respectively. In particular, the growth of toxin export revenue led the profit improvement, and the quarterly operating profit margin (OPM) reached 40.6%. Alteogen (KOSDAQ: 196170), which achieved a disclosed cumulative contract value of 11 trillion won through technology transfer agreements with global pharmaceutical giants GSK and Biogen, also increased its chances of receiving a milestone payment within the year as its partner's quarterly sales of Keytruda SC surged 262% quarter-on-quarter to 463 million dollars. This indicates that the competitiveness of Korean pharmaceutical and biotech companies has settled into a structure that generates high-margin, tangible cash flows in the global commercialization stage beyond the simple research and development stage.

Information & Communications / Platforms: Structural Constitution Improvement through AI Data Center Infrastructure Investment

Investments in artificial intelligence data center (AIDC) infrastructure, undertaken to overcome the stagnation of the traditional wired and wireless communication business, are beginning to bear full-fledged fruit. LG Uplus (KOSPI: 032640) recorded second-quarter consolidated revenue of 3.6949 trillion won, down 3.9% year-on-year, but operating profit increased by 13.1% to 344.5 billion won, exceeding the market consensus (310.3 billion won). Although marketing expenses increased by 7.6% year-on-year to 572.1 billion won, profitability improved due to the rationalization of other operating expenses, and the revenue growth of the AIDC business drove the overall performance.

Its competitor SK Telecom (KOSPI: 017670) also recorded second-quarter consolidated revenue of 4.3591 trillion won and an operating profit of 566.0 billion won (a 67.3% increase year-on-year), exceeding the consensus (542.5 billion won). In particular, the operating profit of its consolidated subsidiary SK Broadband increased by 44.3% year-on-year to 132.5 billion won, supporting the overall earnings improvement of the group. SK Telecom established an AIDC-dedicated corporation, 'SK Hyper', and decided to preemptively inject 330.0 billion won this year out of a total investment of 750.0 billion won. Platform bellwether Kakao (KOSPI: 035720) also posted a second-quarter operating profit of 277.0 billion won (a 69.0% increase year-on-year), confirming the robustness of its core Talkbiz business message business (20% growth). This demonstrates that telecom and platform companies are succeeding in improving their constitution as providers of high-bandwidth data infrastructure, moving away from simple subscriber acquisition competition.

Non-ferrous Metals & Materials: Korea Zinc Breaks Record Quarterly Revenue and Improves Rare Metal Mix

As the instability of the global raw material supply chain intensifies, the profit-generating ability of companies that preemptively diversified their high value-added rare metal portfolios stands out. Korea Zinc (KOSPI: 010130) recorded a consolidated operating profit of 587.0 billion won in the second quarter. It surged 126.8% year-on-year, meeting the market consensus (594.9 billion won), but fell 21.3% from the previous quarter due to the impact of falling gold and silver prices. Favorable exchange rates and the increase in prices and sales of copper and rare metals partially offset the drop in gold and silver prices.

The core of the earnings improvement is the improvement of the rare metal mix and the expansion of sales volume. Second-quarter rare metal revenue was 97.0 billion won, a 22.8% increase from the previous quarter, and the sharp rise in the price of indium to $713 per kg compared to the previous quarter ($546) supported profitability. Korea Zinc is utilizing the facilities of its subsidiary KEMCO to begin the early production of germanium (Crude GeO₂) intermediates, thereby strengthening the independence of the core material supply chain for advanced industries. This signifies structural growth beyond the simple smelting business, taking control of the core material supply chain for global advanced industries.

Market Signals

• Nitto Boseki's Glass Fiber Profitability Surges: The CY2Q26 operating profit of Japan's Nitto Boseki, a supplier of glass fiber which is a core substrate material, increased by 84.8% year-on-year to 7.9 billion yen, exceeding the consensus (6.5 billion yen) by 22.2%. Expanding demand for glass fiber for AI servers drove the earnings.

• Kakao's Operating Profit Surprise: Kakao's second-quarter operating profit increased by 69.0% year-on-year to 277.0 billion won. Talkbiz business message revenue grew by 20%, confirming the robustness of its core business.

• Arista Networks Beats Earnings and Guidance: Arista Networks, a network equipment company benefiting from the expansion of AI cloud infrastructure, exceeded market consensus for both its second-quarter earnings and third-quarter guidance. The surge in demand for high-capacity switches is the background.

• BGF Retail Achieves Record Earnings: BGF Retail (KOSPI: 282330) recorded a second-quarter consolidated operating profit of 84.9 billion won, up 22.3% year-on-year, exceeding the consensus (76.0 billion won) by 11.7%. The simultaneous improvement in the number of customers at existing stores (3.0% increase) and the average spend per customer (1.2% increase) dispelled concerns about a slowdown in domestic consumption.

Epoch View: Investment Implications

In a phase where macroeconomic volatility is maximized due to concerns over rising global interest rates and economic slowdown, the market's center of gravity is thoroughly shifting toward the 'qualitative differentiation' of earnings. Despite short-term supply and demand disruptions in large-cap semiconductor stocks, companies have proven the resilience of their independent fundamentals, such as substrates (Simmtech), where utilization rate recovery and unit price increases were proven by numbers; biotech (SK Biopharmaceuticals), which secured a cash cow by expanding US prescriptions of its self-developed new drug; telecommunications (LG Uplus), which added new growth engines upon a foundation of infrastructure efficiency; and materials (Korea Zinc), which strengthened its underlying strength by diversifying its rare metal portfolio. The higher the macroeconomic waves, the more the answer to investment lies not simply in stocks with excessive drops, but in earnings-driven stocks that proactively build high value-added business mixes to prove high-margin, tangible cash flows.

This content was created through News Epoch's proprietary AI algorithm, which tracks and analyzes public data from research centers of major domestic brokerage firms 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.