Thursday, South Korean stock markets fell sharply.
At the time of writing, the KOSPI index dropped over 4%, currently at 6322.55 points. Among individual stocks, SK Hynix fell over 8% and Samsung Electronics dropped over 5%.
In the Hong Kong market, the Direxion Daily CSI 300 China A Share Bull 2X Shares ETF linked to Hynix fell over 15%, and the 2X leveraged ETF on Samsung dropped over 11%.
Guidance Shock from U.S. Memory Giants
The trigger for this round of selling points directly to the "guidance shock" from the U.S. memory chip sector overnight.
After the U.S. market closed on Wednesday Eastern Time, SanDisk and Western Digital both released their latest financial reports.
The reports showed that these two memory giants delivered unexpectedly strong results for the previous quarter, but their current-quarter guidance both failed to meet Wall Street's higher growth expectations.
Specifically, SanDisk expects next quarter revenue to be between $10.3 billion and $10.8 billion, below analysts' expectation of $11.16 billion. Western Digital expects next quarter revenue between $4.0 billion and $4.2 billion, slightly above the analyst consensus of $4.04 billion.
The "better-than-expected past" was not enough to fully offset the "slightly-below-expectations future."
Following the earnings release, both memory giants were heavily sold off, with SanDisk falling over 8% and Western Digital dropping over 11%.
The pessimistic guidance from the memory giants quickly transmitted through the supply chain to Asian markets.
On Thursday, after the South Korean stock market opened, SK Hynix and Samsung Electronics faced heavy selling pressure.
Data shows that up to the previous trading session, foreign investors had accumulated a net purchase of 1.4513 trillion won in Korean stocks, but on the 6th, they net sold over 500 billion won in the market.
Analysts pointed out that Asian markets ultimately still need to watch the U.S. market's movements and lack pricing power.
Mirae Asset Securities researcher Han Ji-young stated that despite improvements in geopolitics and the macro environment, influenced by the weakening Philadelphia Semiconductor Index and profit-taking after the recent rapid short-term stock price gains, the market is likely to enter a phase of consolidation and sector rotation.
"The exceptionally amplified volatility seen during the July crash has passed its peak."
Latest Response from the Blue House
It is noteworthy that since surging to an all-time high on June 19, the South Korean stock market has been fluctuating downwards. Over the past month, the KOSPI index has accumulated a loss of 21.17%.
Facing the sharply volatile market, the South Korean government is urgently "rescuing the market."
Earlier, Kim Yong-beom, the head of the Office for Government Policy Coordination under the President's Office, faced criminal charges for "rushing the introduction of leveraged ETFs."
In response, Seong Gi-hong, Senior Presidential Secretary for Public Relations and Communication, stated in the latest response that the current priority is to closely monitor market conditions and formulate corresponding countermeasures.
"All relevant officials in the presidential office are carefully examining each situation and very prudently studying how to formulate related measures."
Last Friday, South Korea's financial regulator raised the minimum cash margin requirement for investing in single-stock leveraged ETFs.
After the regulator introduced these restrictive measures, trading volume in South Korean single-stock leveraged ETFs plummeted.
Latest data released by the Korea Exchange showed that the average daily trading volume of 16 single-stock leveraged ETFs fell to 919.8 billion won on Wednesday, dropping below 1 trillion won for the first time since their listing on May 27.
Morgan Stanley noted that the previous intense leverage unwinding is nearing its end, and KOSPI valuations have fallen to historically low levels, providing investors with a more attractive entry point.
However, China Securities (CITIC Securities) holds a different view on this matter.
The institution believes that while leverage among South Korean retail investors has been rapidly reduced, margin balances are still shrinking at the fastest pace this year, and the liquidation rate remains far above normal levels. It expects subsequent market volatility to remain relatively high.
Looking ahead, analysts stated that after a prolonged bull market, the global memory semiconductor sector has entered a phase of high sensitivity and high volatility, and short-term sentiment shocks need time to digest.
From a medium to long-term perspective, Goldman Sachs firmly maintains its target of 12,000 points for the KOSPI index, expecting the market still has about 80% to 90% upside potential.
The bank believes that current market pricing does not reflect the potential severe shortage of memory chips, which could persist until 2030. As AI computing demand accelerates, the semiconductor industry, which accounts for over 50% of the KOSPI's weight, will become a global profit engine.
J.P. Morgan similarly maintains its optimistic outlook on SK Hynix and the memory chip industry, viewing this pullback as an opportunity to increase positions.
This article is from the WeChat public account "Gelonghui APP" (ID: hkguruclub), author: Gelonghui Editor.
