KOSPI Circuit Breaker Triggered Amid Market Plunge [Photo=Yonhap News]

Last week, Money Insight asked whether foreign spot selling was ceasing, if the KRW/USD exchange rate was returning to below 1,530 won, whether the flow of funds in margin loans and single-stock leveraged products was breaking, if the Coupang issue would lead to formal U.S. trade proceedings, and whether semiconductor earnings estimates could overcome supply-demand instability.

The answer this week was that “the exchange rate has stabilized, but the discount rate has not declined.”

The first change is the decoupling of the exchange rate from foreign supply and demand.

Although the KRW/USD exchange rate fell to around 1,500 won, foreigners returned to net selling after only two days of net buying. This is because a significant portion of the exchange rate decline was linked to expectations of dollar supply following SK Hynix ADR funding. The mere fact that the won strengthened was not enough to conclude that foreigners had increased their holdings of Korean stocks.

The second change is the decoupling of corporate earnings from stock prices.

Despite Samsung Electronics announcing record operating profits, its stock price fell, and the KOSPI slid by 7.6% over the week. While strong earnings can support a company's long-term value, they could not prevent short-term price drops driven by profit-taking, margin calls, and heavy foreign selling.

The third change is the decoupling of fundamentals from market structure.

As index-linked funds, individual margin debt, and single-stock leveraged products became concentrated in Samsung Electronics and SK Hynix, the speed of supply and demand determined prices more than corporate value. The outflow of $30.5 billion from the Korean stock market in June shows that, apart from AI memory profit outlooks, the market's concentration and volatility were recognized as discount factors.

Policy uncertainty may also be perceived as a discount factor. The Section 301 trade petition regarding Coupang is posted on the USTR website, but the initiation of a formal investigation has not been confirmed. It is an exaggeration to claim that U.S. retaliatory procedures have already begun. However, the mere fact that a formal investigation remains a possibility can increase trade uncertainty surrounding Korean assets.

The theme of this week's trend is “discount rates beyond the exchange rate.”

It was not just the weakness of the won that depressed the price of Korean assets. Beyond foreign supply-demand dynamics, concentration in semiconductors, and leveraged structures, policy uncertainty is now being recognized as a discount factor.

The question for this week is as follows:

“Is the discount rate for Korean assets a matter of exchange rates, or a matter of market structure and policy credibility?”

The answer is both, but the latter has gained more weight this week. If foreigners do not return even when the exchange rate stabilizes, and stock prices plunge despite record earnings, the market is pricing in risks beyond corporate profits.

The one-sentence conclusion is this:

“The won has strengthened, but the discount rate applied to Korean assets has not.”

There are aspects on both sides that should not be exaggerated. One should not declare the collapse of the Korean economy or the semiconductor industry simply because the KOSPI has fallen more than 20% from its peak. A 20% drop is merely the threshold for a technical bear market, not an absolute line confirming a breakdown of fundamentals. Conversely, it is premature to declare the end of the correction based on one or two days of sharp rebounds.

There are five checkpoints for next week.

First, we must confirm whether won stabilization and foreign net buying appear simultaneously.

Second, we must see if the rebound spreads to sectors and stocks outside of Samsung Electronics and SK Hynix.

Third, we must check whether financial authorities issue specific measures regarding single-stock leveraged products and margin loans.

Fourth, we must verify whether the USTR moves to initiate a formal investigation into the Coupang petition.

Fifth, we must observe whether U.S. CPI data and TSMC earnings boost expectations for AI profits more than they increase interest rate burdens.

※ Key data sources: Korea Exchange, Seoul Money Brokerage Services, Institute of International Finance, Office of the United States Trade Representative, Samsung Electronics, SK Hynix, U.S. Bureau of Labor Statistics, TSMC. Reference date is the closing price on July 10, 2026, or the announcement date of each respective institution.

※ This material is for reference regarding market trends and is not a recommendation to buy or sell any specific financial product.