South Korea's stock market experienced violent swings over the past week, with volatility reaching historic highs.
On one day, SK Hynix announced record-breaking results and the market expected a large shareholder return plan, sending the KOSPI up more than 6% in a single session; on other trading days, disappointing earnings from US tech giants dampened risk appetite and the index plunged sharply.
The KOSPI failed to hold the 6,000-point threshold. Korea Exchange data showed the KOSPI closed at 5,730.74 points on October 30, down 206.92 points or 3.48% from the previous session.
The index had closed at 6,012.44 points on October 28, briefly raising hopes of a rebound, but fell back to 5,937.66 points on October 29, declining for a second consecutive trading day.
As losses widened, the main board triggered a circuit breaker sidecar mechanism, temporarily halting programmatic sell orders.
Massive foreign selling was the primary cause of the decline. Foreign investors net sold 1.6168 trillion won (about $1.1 billion) on that day alone, dragging the market lower.
Analysts attributed the weakness to disappointing earnings from US tech giants, which reignited concerns over the outlook for AI capital expenditure. Alphabet, Intel, and Amazon all reported third-quarter results below market expectations, with Alphabet drawing particular attention after posting negative free cash flow for a second consecutive quarter.
South Korea's two major chip leaders, Samsung Electronics (005930) and SK Hynix, released earnings during the same period, both beating expectations and setting new records.
SK Hynix disclosed on October 28 that third-quarter operating profit surged 632.1% year-on-year to 83.3338 trillion won, marking a sixth consecutive quarter of record profits since the second quarter of last year, while revenue also exceeded 100 trillion won for the first time.
What truly ignited the market, however, was the scale of its shareholder return plan: SK Hynix announced an additional 60 trillion won in shareholder returns and significantly raised its dividend, fueling expectations of share price gains.
Samsung Electronics also delivered record results, but its announced shareholder return plan fell short of market expectations, and its shares weakened after the earnings release — an unusual move given the strong performance.
Samsung said it will return up to 110 trillion won to shareholders this year, including 30 trillion won in third-quarter cash dividends, but details will not be finalized until a board meeting at the end of January.
Samsung fell 4.13% on the day of its earnings release (October 29).
Amid the market's repeated swings, attention turned to next week's outlook. A potential negative factor is market concerns about returns on AI investment.
On October 30, after Amazon and Intel's earnings were released, worries about AI infrastructure spending intensified, and major US stock indices all closed lower, with selling pressure concentrated in the tech sector. The Nasdaq 100 fell 3.46%.
Intel plunged 28.58%, losing more than $140 billion in market value in a single day, further intensifying uncertainty.
Volatility Likely to Persist
Brokerages believe high volatility will likely continue, but advise investors to stick with a chip-stock-centric approach focused on shareholder returns.
Lee Jae-won, a Korea analyst at Yuanta Securities, said: "Companies generally believe that falling behind in the AI race means permanently missing this massive wave, and the broader trend is hard to reverse. The market is likely experiencing a phase of turbulence within that larger trend. Investors can wait for credit risk to stabilize and for signals of foreign capital returning, then add positions in batches, continue holding existing chip names, and diversify into equipment and materials makers as well as energy storage sectors for additional gains."
Kang Jin-hyuk, a senior analyst at Shinhan Securities, said: "The weak link in the AI capital expenditure chain — earnings from new cloud providers — is still being disclosed, so we cannot let our guard down yet. Foreign capital flows are volatile, and the liquidity environment remains fragile. However, much of the bad news has already been priced in by the market, and some uncertainty will be removed after the midterm elections, making it worth watching for a gradual shift in market sentiment."
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