KOSPI slides 5% after record surge, while funds rotate to Kosdaq

The KOSPI and Kosdaq are displayed in the dealing room of Hana Bank in Seoul, Monday. The benchmark KOSPI closed at 6,257.45, down 5.12 percent from the previous session, while the secondary Kosdaq closed at 737.35, up 2.44 percent. Yonhap

Korea's stock indexes moved sharply in opposite directions Monday, with the KOSPI tumbling more than 5 percent while the tech-heavy Kosdaq triggered a buy-side trading curb after a sharp intraday rebound.

The benchmark KOSPI closed at 6,257.45, down 5.12 percent from the previous session, when it surged nearly 18 percent for its biggest gain on record. The index opened 3.6 percent lower, slipped below the 6,500 mark and extended losses throughout the session.

Foreign and institutional investors sold a net 2.84 trillion won ($1.98 billion) and 1.95 trillion won of shares, respectively. Retail investors bought a net 4.65 trillion won.

SK hynix fell 8.79 percent to close at 1,567,000 won, while Samsung Electronics dropped 8.76 percent to 239,500 won. The shares had gained 29 percent and 30 percent, respectively, in the previous session before coming under profit-taking pressure.

Kosdaq rose 2.44 percent to close at 737.35. The index opened 1.36 percent lower before reversing course around 9:30 a.m. A buy-side sidecar was triggered at 10:28 a.m., though the index pared some gains before the close.

"Kosdaq extended its gains as investor funds, previously concentrated in semiconductor shares, rotated into pharmaceutical, biotech and robotics stocks," said Lee Kyoung-min, an analyst at Daishin Securities.

U.S. President Donald Trump's decision to postpone a strike on Iran also eased market concerns. U.S. crude futures fell back below $80 a barrel, while yields on two-year and 10-year U.S. Treasury notes dropped below 4.25 percent and 4.70 percent, respectively, boosting investor sentiment.

Despite Friday's sharp rally, KOSPI posted a 22.1 percent loss in July, its third-worst monthly performance since 1990. Its forward price-to-earnings ratio remains near a record low of 5.5 times, reinforcing the view that valuations had fallen to historically depressed levels, according to Han Ji-young, an analyst at Kiwoom Securities.

"With the KOSPI surging more than 17 percent on Friday to post its biggest one-day gain on record, the market could face some temporary profit-taking and consolidation early this week," Han said. "Going forward, we expect the Korean stock market to move into a recovery phase, with each pullback likely to establish a higher low than the last."

The won weakened slightly against the dollar. The won-dollar exchange rate closed at 1,429.8 won per dollar, rising by 5.8 won from the previous session.