KOSPI falls 2.7% below 7,000 as Samsung and SK hynix slide, while global banks remain bullish despite rising yields and market risks.
South Korea's benchmark KOSPI index fell 2.70% on Monday, September 28, as trading resumed after the Chuseok holiday, with heavy foreign selling of Samsung Electronics and SK Hynix pushing the market back below 7,000 and leaving it roughly a quarter below its June record. The index closed at 6,889.74, down 191.18 points, the first close below the 7,000 level in four trading days. The drop came as global banks such as Goldman Sachs and JPMorgan kept 12-month targets at 12,000 or higher, while Korean securities houses have trimmed year-end targets and forecast near-term trading ranges around current levels.
The session opened at 7,057.86 and weakened steadily. Samsung Electronics fell 5.43% to 270,000 won and SK Hynix dropped 5.05% to 1,768,000 won, and exchange data showed foreign investors net sold 3.24 trillion won of main-board shares while institutions sold 1.02 trillion won and individuals bought 2.61 trillion won. The losses were concentrated in the largest stocks: rising issues outnumbered decliners 611 to 249 on the main board, and the secondary KOSDAQ rose 0.25% to 846.58, helped by a limit-up gain in HLB after its U.S. unit won Food and Drug Administration approval for a bile duct cancer drug.
Much of the selling reflected events that took place while Seoul was closed from September 24 to 27. The 10-year U.S. Treasury yield rose to 5.22%, its highest since 2007, and the 30-year yield topped 5.5%, the highest since 2004, and the won weakened by 7.6 won to 1,365.1 per dollar on Monday. Bank of Korea Senior Deputy Governor Kwon Min-soo told a market-monitoring meeting that uncertainty in international financial markets had risen further over the holiday and that the central bank would watch conditions closely. Sentiment toward AI hardware was also hit after Oracle sent a "force majeure" notice to the developer of its Project Jupiter data center in New Mexico; the company said in a statement that "Project Jupiter remains on our planned schedule." Lee Kyoung-min, an analyst at Daishin Securities, said the surge in Treasury yields and news of delays to Oracle's data center business had weighed on investor sentiment and left chip stocks clearly weaker. For SK Hynix, some analysts pointed to added pressure from reports that Solidigm, one of its subsidiaries, would pursue a U.S. initial public offering.
Monday's decline extends a year of sharp market swings. The KOSPI first crossed 5,000 intraday on January 22, a level President Lee Jae Myung had pledged to reach, amid an AI-driven memory chip cycle and government "value-up" policies aimed at shareholder returns. It closed above 9,000 for the first time on June 18 and set a record close of 9,114.55 on June 22, the day SK Hynix overtook Samsung Electronics in common-share market value. The intraday record of 9,385.59 was set on June 19. Monday's close is about 24% below the record close.
The reversal came in July. Exchange data compiled at the time showed foreign investors net sold about 17.9 trillion won of shares on the KOSPI and KOSDAQ in July through July 28, when the index fell 10.84% in a single session that triggered both a sidecar and a circuit breaker. Analysts cited concern about China's progress in chipmaking equipment and memory production, including ChangXin Memory Technologies, doubts about the durability of hyperscaler spending, and worries that memory earnings were peaking. Market participants also pointed to mechanical trading in single-stock leveraged exchange-traded funds tied to Samsung Electronics and SK Hynix as a source of amplified volatility. The index closed at 5,593.56 on July 30, about 40% below the intraday record, before surging 17.91% to 6,595.45 on July 31, its largest one-day gain on record, as foreign investors net bought 7.24 trillion won in a rebound brokerages attributed to strong quarterly results from Microsoft and a recovery in AI-related sentiment.
Regulators moved during the sell-off. The Financial Services Commission announced that from July 16 new listings of single-stock leveraged products and related advertising were barred, and it also brought forward to July 31 a rule requiring retail investors to hold at least 30 million won in cash before buying such products, up from the previous 10 million-won requirement, which could include substitute securities, before buying such products. The commission said it would also consider bringing forward a planned increase in the minimum trading lot for domestically listed single-stock leveraged products to 20 shares from one, initially scheduled for November.
The recovery since then has leaned heavily on the two chipmakers. The KOSPI rose 3.40% in August to 6,820.02, even as foreigners net sold 9.79 trillion won and institutions 7.92 trillion won on the main board that month. SK Hynix announced on August 19 that it would repurchase and cancel 40 trillion won of its shares, which it called the largest treasury share cancellation by a South Korean listed company, and Samsung Electronics said on August 21 it expected shareholder returns of about 90 trillion to 110 trillion won for 2026, including a third-quarter cash dividend of about 30 trillion won, alongside a separate buyback of about 15 trillion won for employee compensation. Monday was the last day to buy Samsung shares with entitlement to that dividend; the stock goes ex-dividend on September 29, ahead of the September 30 record date.
Those purchases are nearing completion. According to exchange disclosures tallied on September 20, Samsung had bought back 74.69% of its planned shares and SK Hynix 58.79%, and both programs were expected to finish by mid-October at their current pace, it was reported. Between August 20 and September 18, corporate investors net bought 33.2 trillion won of shares while foreign investors sold 18.45 trillion won. "Buying by other corporations has been helping put a floor under the market amid heightened external uncertainty," Daishin's Lee said, adding: "But it would not be enough to prevent the index from falling if selling by foreign and institutional investors intensifies."
Monetary policy has tightened on both sides of the Pacific. The Bank of Korea raised its base rate by 25 basis points to 3.00% on August 27, its second straight increase, in a 6-1 vote with board member Hwang Kunil favoring a hold, and lifted its 2026 growth forecast to 3.3% from 2.6% on semiconductor strength. The board said "inflation is expected to remain above the target level for a considerable time" and that it would decide the timing and pace of further increases based on incoming data. Its next rate decision is scheduled for October 22. In Washington, the Federal Open Market Committee voted 12-0 on September 16 to raise the federal funds target range to 3.75% to 4%, stating that "Inflation remains elevated." It was the Fed's first increase since 2023 and the first policy move under Chair Kevin Warsh, and 12 of 18 officials projected one more hike this year. Daishin's Lee noted before the holiday that the probability of another 25 basis point Fed increase in October exceeded 50%.
Against that backdrop, published KOSPI targets vary widely. Goldman Sachs raised its target to 12,000 from 9,000 in early June, and its chief Asia-Pacific equity strategist, Timothy Moe, said in an interview on September 4 that he was keeping it, arguing the market was underestimating how long the memory earnings cycle would last. Goldman estimates KOSPI earnings growth of about 360% this year, slowing to 35% next year, and its target implies 7.5 times forward earnings against about 5.3 times at the time. JPMorgan lifted its 12-month targets on June 25 to 12,500 in its base case, 15,000 in a bull case and 8,000 in a bear case, and kept the base case at 12,500 on July 21, saying the sell-off stemmed mainly from the unwinding of leveraged ETF and hedge fund positions and that roughly 75% of that deleveraging had taken place. Morgan Stanley upgraded Korea to overweight in early August while keeping a 9,000 target, and Nomura kept the 10,000 to 11,000 range it set in May. HSBC also moved to overweight in August, while Citi kept a neutral stance, it was reported. Measured against Monday's close, Goldman's target implies a gain of about 74% and JPMorgan's base case about 81%.
Domestic brokerages have been more restrained. After the July collapse, Daishin Securities cut its 2026 target to 9,300 from 11,500, lowering the price-to-earnings multiples it applies to chip and non-chip stocks because of higher U.S. yields and the prospect of further Fed tightening, and Shinhan Investment cut its target to 8,800 from 11,000. Samsung Securities has left open an upper bound of 12,600 and Korea Investment & Securities 11,000 for the year-end, while iM Securities analyst Kim Jun-young expected trading to stay in a box around 7,000 because chip earnings estimates had stalled, it was reported in early September. Daishin's Lee has set a first rebound target of 7,600, equal to six times forward earnings compared with 5.49 times now, and a six-month target of 9,300 if the multiple recovers to seven. For the shorter term, Kiwoom Securities expects a range of 6,800 to 7,250 this week, and Daishin sees 6,500 to 7,200 in October.
The government's structural agenda continues in the background. The National Assembly passed a third Commercial Act amendment on February 25 that took effect on March 6, generally requiring companies to cancel newly acquired treasury shares within one year, with existing holdings to be cancelled by September 6, 2027. A separate, lower tax rate of 14% to 30%, excluding local tax, on dividends from qualifying high-dividend companies applies to payments received from January 1, 2026, on a temporary basis through dividends paid in 2029. Those steps have not yet changed Korea's index status. In its June 23 review, MSCI kept Korea in the emerging-market category and did not add it to the watch list for a possible upgrade, acknowledging measures by authorities but stating, "The Korean won is not deliverable offshore." MSCI also said market participants continued to face significant operational burdens under the compliance regime reinstated after the short-selling ban was lifted. The administration has pursued eight initiatives under a roadmap aimed at developed-market inclusion, including abolishing the foreign investor registration system and expanding English-language disclosure.
Trade policy remains a further variable for the chip-heavy market. Industry Minister Kim Jung-kwan said on September 3 that talks with Washington on U.S. semiconductor tariffs were proceeding on the understanding that Korean chips would not be treated less favorably than those of competitors, as set out in a joint fact sheet published last November, and that the U.S. side had not given a timeline for announcing chip tariffs.
The coming weeks bring several tests. Micron Technology reports results and the U.S. releases August personal consumption expenditures price data on September 30, Korea publishes September export figures on October 1, and Samsung Electronics is due to release preliminary third-quarter results in early October. A consensus of eight brokerages puts Samsung's third-quarter operating profit at about 106.99 trillion won, roughly 20% above the 89.4 trillion won it earned in the second quarter. Even Goldman's Moe, among the most optimistic forecasters, has flagged the expansion of Chinese rivals such as ChangXin Memory Technologies and possible political pushback against U.S. data center construction as risks to that outlook.
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