KOSPI's 'Black Tuesday'... Samsung Electronics Falls 4.9% Despite Record-Breaking Earnings

The KOSPI fell by nearly 5% after Samsung Electronics released its preliminary earnings. Extreme volatility followed, with a sell-side sidecar and then a level-1 circuit breaker mechanism both being triggered. According to the Korea Exchange on the 7th, the KOSPI ended the session at 7,656.31, down 4.91% from the previous day. The index opened at 7,919.20 but slid as low as 7,389.22 during the day. The KOSDAQ (Korea Securities Dealers Automated Quotations) closed at 831.23, down 1.87% from the previous session.
Foreign investors drove the index lower by dumping a large amount of shares. They posted a net sale of 292.98 billion won in the KOSPI. Institutions also sold 309.2 billion won. Retail investors, meanwhile, bought 313.43 billion won and helped cushion the market's plunge.
Market stabilization measures were activated one after another. At 10:23 a.m., a sell-side sidecar was triggered on the Korea Exchange Main Board. It was the 32nd sidecar activation on the main board this year. At 1:51 p.m., a level-1 circuit breaker mechanism was triggered, suspending trading for 20 minutes. It was the sixth activation this year and the 12th ever.
At the center of the sharp decline was weakness in semiconductor stocks after Samsung Electronics announced its preliminary earnings. Samsung Electronics closed at 296,000 won, down 6.92%, while SK hynix fell 6.06% to 2,201,000 won. Although Samsung Electronics' second-quarter results were seen as beating market expectations, investors increasingly felt that they still fell short of elevated hopes. After the earnings release, profit-taking spread across the semiconductor sector.
Han Ji-young, a researcher at Kiwoom Securities, said, "After Samsung Electronics' preliminary earnings, the market largely viewed it as a sell-on-the-news event in the short term, and distortions in supply and demand from single-stock leveraged products also helped accelerate the decline." She added, "Prolonged exposure to an abnormal volatility environment, where sidecars have become routine, has also increased fatigue among market participants."
Kang Jin-hyuk, a senior researcher at Shinhan Investment & Securities, also stressed that "just as panic selling followed Micron's earnings release recently, investors with concerns about a peak after record profits moved early to take profits."
Still, the consensus in the brokerage industry is that the recent decline should not be read as a trend. Han Ji-young said, "It is necessary to refrain from interpreting the recent rise in volatility as a structural downtrend in the index." She added, "As the forward price-to-earnings ratio (P/E ratio) for the KOSPI 7400 level has fallen to its lowest level since the financial crisis, maintaining existing stock exposure and positions may be a better strategy than panic selling."
fair@fnnews.com Han Young-joon Reporter