KOSPI plunges 5.46% as foreign selling drives valuations to record low
KOSPI and the share prices of SK hynix and Samsung Electronics are displayed in the dealing room of Woori Bank in Seoul, Tuesday. The benchmark index closed at 6,035.35, down 5.46 percent from the previous session. SK hynix and Samsung Electronics fell 10.09 percent and 7.39 percent, respectively, to close at 1,443,000 won and 232,000 won. Yonhap
KOSPI plunged 5.46 percent Tuesday, as heavy foreign selling and deteriorating sentiment toward semiconductor stocks pushed the benchmark index's 12-month forward price-to-earnings ratio to a record low on a closing basis.
KOSPI closed at 6,035.35, down 5.46 percent. A sell-side sidecar was triggered at 9:47 a.m., marking the 26th activation this year. It fell below 6,000 intraday before recovering slightly by the close.
Foreign investors sold a net 4.51 trillion won ($3.36 billion), while institutional and retail investors bought 1.69 trillion won and 2.23 trillion won, respectively.
Semiconductor stocks led the decline, with SK hynix sliding 10.09 percent to 1,443,000 won and Samsung Electronics dropping 7.39 percent to 232,000 won.
A Financial Times report suggested OpenAI's annualized revenue stood at $50 billion, about 30 percent below the previously reported $70 billion. Toshiba's plans to expand HDD production and CXMT's planned launch of new server memory products also weighed on sentiment.
"The key reason why foreign selling on a scale similar (to August and September) has now triggered a sharp market decline is the disappearance of the buffer provided by share buybacks," said Lee Kyoung-min, an analyst at Daishin Securities.
Foreign investors sold a net 31.7 trillion won worth of Korean equities in August and September, yet KOSPI gained 3.7 percent, as share buybacks by Samsung Electronics and SK hynix absorbed an average of 1.61 trillion won in selling pressure per day, according to Lee. Samsung Electronics' buyback program has ended, while SK hynix's is set to end this week.
Macroeconomic uncertainty also remains elevated. Although oil prices have eased following U.S. President Donald Trump's announcement that he would refrain from attacking Iran until after the midterm elections, interest rates and refined petroleum product prices remain high.
Lee said KOSPI's 12-month forward price-to-earnings ratio fell to a record low of 4.54 at Tuesday's close, below the previous low of 4.74 recorded on July 30.
"Current valuations imply that the market is already pricing in a 35 to 51 percent decline in earnings relative to current forecasts," Lee added.
The tech-heavy Kosdaq declined 1.43 percent to 837.03.
The won-dollar exchange rate closed at 1,345.1 won per dollar, up 10 won from the previous session.