Korean stocks experienced sharp volatility as the KOSPI fell nearly 20% from recent highs, with individual investors net selling 1.2673 trillion won in a single session. The selloff was driven by growing doubts about AI infrastructure investment sustainability and semiconductor earnings growth, according to securities firm research center heads. Market analysts identified the 7,000-point level as a key psychological support line, with future direction dependent on US big tech capital expenditure trends and semiconductor company earnings reports.
Individual Investors Exit Amid AI Investment Doubts
The KOSPI's decline has accelerated investor fatigue as the index failed to recover losses over consecutive sessions, contrasting with patterns from two to three months earlier. Securities research center directors diagnosed the selling pressure as stemming from expanded profit-taking desire as questions grew about AI capital expenditure continuity and semiconductor profit growth rates. The market has experienced increased frequency of multi-day declines without recovery of prior losses.
BOK Governor Shin Signals Rate Hike at Appropriate Time
Bank of Korea Governor Shin Hyun-song reiterated the need for a benchmark rate increase ahead of next week's Monetary Policy Committee meeting. He cited inflation above target levels, improved growth momentum, and increased financial stability risks as grounds for the policy shift, noting that continued semiconductor sector strength could push growth above the May forecast of 2.6%. Governor Shin stated that a big step increase of 0.5 percentage points is unlikely, clarifying that his previous comments described general considerations rather than specific policy plans. He characterized recent won weakness as temporary, projecting potential currency appreciation based on accumulated current account surpluses.
Banking Stocks Rise as Semiconductor Sector Weakens
Banking stocks posted gains while the KOSPI fell approximately 14% in July. Shinhan Financial Group rose 9.60%, with KB Financial up 7.80%, Hana Financial Group gaining 6.98%, and Woori Financial Group advancing 3.62%. The eight major banks' second-quarter net income attributable to controlling interests is expected to reach 5.6 trillion won, meeting market expectations. Interim dividend payments and share buyback-cancellation expectations supported bank stock performance. High-dividend covered call exchange-traded funds with significant financial sector allocation recorded the top returns among domestic equity ETFs over the recent one-week period.
Commodity Mining ETFs Record Sharp Declines
Commodity mining-focused exchange-traded funds that dominated ETF return rankings since late last year have posted significant losses recently. The WisdomTree Efficient Gold Plus Gold Miners Strategy (GDMN) fell 28.46% over three months, while Global X Gold Miners (GOEX) declined 19.38%, with silver mining ETFs showing similar patterns. Copper mining ETF Sprott Junior Copper Miners (COPJ) was the sole gainer at 0.15%, benefiting from AI data center and power grid investment expansion. Lithium mining ETF Sprott Lithium Miners (LITP) dropped 12.56% over three months on concerns about supply increases from new mine development and delayed electric vehicle demand recovery.
FAQ
What caused the KOSPI to fall nearly 20% from recent highs?
The decline was driven by growing doubts about AI infrastructure investment sustainability and semiconductor earnings growth, according to securities firm research center heads. Individual investors net sold 1.2673 trillion won in a single session as profit-taking desire expanded.
What did BOK Governor Shin say about interest rate policy?
Governor Shin Hyun-song stated that the Bank of Korea will raise the benchmark rate at an appropriate time, citing inflation above target levels, improved growth momentum, and increased financial stability risks. He clarified that a 0.5 percentage point increase is unlikely and characterized recent won weakness as temporary.
Why did banking stocks rise while the KOSPI fell in July?
Banking stocks gained on expectations of interim dividend payments and share buyback-cancellation programs, with the eight major banks' second-quarter net income expected to reach 5.6 trillion won and meet market expectations. Shinhan Financial Group rose 9.60% while the KOSPI fell approximately 14% during July.
