While the Korean stock market benefited from the AI semiconductor rally, it has become a high-beta market that is the first to be sold off during corrections. [Photo: Hanmi Ilbo Graphics]

The key to capital circulation this week was the overreaction of Korea-related assets. 
The Coupang report has emerged as a new variable in the discount rate for Korean assets.

It is true that emerging markets as a whole were shaken, but the decline in the Korean ETF (EWY) and KOSPI 200 overnight futures was more severe. This was less a matter of global risk aversion and more a result of selling pressure concentrated on Korean semiconductors.

The question for the Capital Rotation Radar last week was as follows.

“Is the volatility in the Korean stock market a revaluation of semiconductors, or the aftermath of supply-demand overheating?”

The market's answer this week has become even colder. While a revaluation of semiconductors exists, a phase has emerged where the aftermath of supply-demand overheating is overshadowing that revaluation. Foreign investors took profits on Korean semiconductors, and the weakening Korean won further amplified the burden of foreign selling.

Retail investors absorbed the decline, but their buying, fueled by leverage and margin debt, increased market volatility while simultaneously attempting to boost resilience.

The theme of this week's market movement is the 'Counterattack of Korean Beta.'

The Korean stock market was a beneficiary of the AI semiconductor rally. However, a beneficiary market is also the first to be sold off during a correction.

When US semiconductors falter, Korean semiconductors follow, and when Korean semiconductors shake, the entire KOSPI is affected. Compounded by the KRW/USD exchange rate climbing to around 1,550 won, foreign investors found themselves pressured by both stock prices and currency depreciation.

An important new variable is the US House of Representatives' Coupang report. 

The Coupang report is not merely a problem for one company; it represents policy risk that could expand into issues regarding the discriminatory treatment of US firms in Korea, digital trade barriers, the fairness of investigations, Section 301 petitions, and Section 232 semiconductor cards.

This does not mean that high tariffs will be immediately imposed on Korean semiconductors. However, in a phase where foreign selling and currency depreciation are already underway, a report like this can serve as a catalyst that increases the risk premium on Korean assets.

The question for this week is:

“Did foreign investors sell Korea, or did they sell the semiconductor overheating within Korea?”

The answer is both. Rather than rejecting the entire Korean economy, foreign investors trimmed their exposure to Korean semiconductors, which had risen too rapidly. However, when combined with the weakening won and the US House report, that selling can be interpreted as more than just simple profit-taking; it signals a rise in the discount rate for Korean assets.

The conclusion in one sentence is as follows:

“The Korean stock market did not collapse due to a lack of capital; it faltered as semiconductor concentration and policy risks were simultaneously reflected in prices.”

There are five checkpoints for next week.

First, we must confirm whether net foreign selling of spot stocks is slowing down.

Second, we must distinguish whether retail buying is driven by increased leverage or cash-based bargain hunting.

Third, we need to see if the KRW/USD exchange rate stabilizes below the 1,530 won level.

Fourth, we must monitor whether the US House report leads to USTR Section 301 proceedings or further congressional pressure.

Fifth, we must verify if the trend of the EWY underperforming compared to emerging market ETFs ceases.

※ This document is for reference and analysis of market trends and does not constitute a recommendation to buy or sell any specific financial product.