KOSPI enters bear market

South Korea’s benchmark KOSPI has entered bear-market territory after a rapid reversal in the country’s chip-led rally, with Samsung Electronics and SK Hynix at the center of the slide. Reuters reported on July 8 that the index had fallen more than 20% from a record close in late June, meeting the conventional definition of a bear market. The drop followed a selloff in the two memory-chip stocks that dominate South Korea’s equity market. CNBC reported on July 9 that the KOSPI was still up about 69% for the year despite the correction. ### How did a market that was leading the world fall this fast? The KOSPI’s decline has been unusually concentrated in semiconductors. CNBC reported that Samsung Electronics and SK Hynix accounted for more than half of the index’s weighting as of June, citing data from Emmer Capital. That concentration meant losses in the two stocks had an outsized effect on the broader market. (msn.com) June 18 was the high-water mark for the rally. Market coverage cited by search results showed the KOSPI closing above 9,000 for the first time, driven by enthusiasm around AI-linked memory demand and SK Hynix’s shipment of HBM samples to customers. Within weeks, that optimism gave way to questions about whether AI infrastructure spending and memory pricing could keep rising at the same pace. (cnbc.com) ### Why are Samsung and SK Hynix driving the move? Samsung Electronics and SK Hynix are South Korea’s two most important listed chipmakers, and both had been major beneficiaries of the AI trade. Reuters reported on July 7 that Samsung projected a 19-fold jump in second-quarter operating profit, helped by AI-related memory demand, but the company’s shares still fell as investors focused on concerns over whether the spending boom could cool. (techtimes.com) Bloomberg said this week that South Korea’s “memory giants” were testing the durability of the AI trade as Samsung prepared earnings and SK Hynix moved ahead with a U.S. listing. That framing matched the market reaction: even strong profit expectations were not enough to stop investors from cutting exposure to the stocks most closely tied to AI hardware demand. (thestar.com.my) ### What are investors worried about now? Manishi Raychaudhuri, chief executive of Emmer Capital, told CNBC that South Korea’s drawdown had been driven by “heightened AI skepticism” among global investors, combined with “extreme market concentration.” His comments pointed to two linked concerns: whether AI spending is peaking too quickly, and whether one trade had become too dominant in Seoul. (bloomberg.com) The Bank of Korea has also warned about single-stock leveraged exchange-traded funds tied to Samsung and SK Hynix. Bloomberg, citing Yonhap, reported on July 5 that the central bank said those products could deepen concentration, amplify volatility and intensify one-way trading flows. Reuters separately reported on July 8 that Finance Minister Koo Yun-cheol and other policymakers agreed to closely monitor risks that could heighten stock-market volatility. (cnbc.com) ### Is this only a South Korea story? SK Hynix’s planned U.S. listing shows the story reaches beyond Seoul. Reuters reported on July 6 that the company launched a U.S. share sale to raise about 43 trillion won, or roughly $28 billion, one of the world’s largest new share offerings. Bloomberg also reported that trading was expected to start on July 10. (bloomberg.com) July 10 is now the next date investors will watch closely. SK Hynix is expected to begin Nasdaq trading that day, while Samsung is scheduled to release full second-quarter results on July 30, according to Morningstar’s earnings note. Those two milestones will give investors fresh data on whether the pressure on South Korea’s AI-linked stocks is easing or deepening. (bloomberg.com) (money.usnews.com)