The South Korean stock market is bearing the heavy pressure of a "catch-up decline" following a holiday. Impacted by a global sell-off in semiconductor stocks during the Constitutional Day holiday period, the Korea Composite Stock Price Index (KOSPI) plunged over 5% at one point during trading on July 20, hitting a low of 6472 points, putting the critical 6500 support level in serious jeopardy. The cumulative decline over two consecutive trading sessions has exceeded 10%, sharply increasing market focus on potential downside support.
At the close, the KOSPI was down 4.46% from the previous session, settling at 6516.27 points, just a step away from the 6500 psychological barrier. Foreign and individual investors together executed net purchases exceeding 200 billion won on the day, providing some cushion against the fall. However, institutional investors were net sellers to the tune of 243.9 billion won, with financial investment institutions alone accounting for a net sell-off of 295.6 billion won, constituting the primary selling pressure.
Holiday "Gap" Triggers Catch-Up Decline, Global Semiconductor Slump is Catalyst
On the last trading day before the holiday (July 16), the KOSPI had already tumbled 6.37%. During the domestic market closure for the Constitutional Day public holiday (July 17), the global semiconductor sector faced a fresh round of selling.
The Philadelphia Semiconductor Index fell a cumulative 5.85% over two trading days on the 16th and 17th local time, with intraday lows showing declines of up to 9.71%. TSMC dropped 7.29% on the 17th alone, while Kioxia saw a much steeper fall of 16.10%.
Opening on the 20th, the KOSPI started 2.60% lower at 6643.58 points and continued to slide. Market observers noted that shares like Samsung Electronics and SK Hynix had already released some adjustment pressure in the previous session. Coupled with valuations already falling to historically low levels, this led to relatively active buying interest around the 6500-point level, with bargain-hunting sentiment helping to somewhat limit the extent of further declines.
6500 Points: The Critical Battleground for Bulls and Bears
The significance of the 6500 level lies in its recognition as the next key support within the current market technical analysis framework. Goldman Sachs had previously explicitly listed this point as the direct support level for the KOSPI after a breach of the 6800 support, with the next zone being the 6100 to 6000 point range.
Daishin Securities pointed out that the KOSPI's 12-month forward price-to-earnings ratio (P/E) is currently only 5.81 times, already within a historically low valuation range. Having been among the first global markets to enter a correction, the KOSPI also possesses the potential to be among the first to find a bottom.
NH Investment & Securities stated during a media briefing that day that, given current conditions, an appropriate "bottom" would correspond to a forward price-to-book ratio (P/B) of 1.3 to 1.4 times, which translates to a KOSPI level of around 6000 points. Analysts simultaneously emphasized that it is "still premature" to discuss whether the semiconductor industry has reached a cyclical peak.
Institutions: Sell-Off Driven by Positioning, Fundamental Inflection Point Not Yet Evident
Several analysts believe the core logic behind this sharp decline lies in position adjustments rather than a substantive deterioration in semiconductor fundamentals.
The analysis suggests the essence of the issue is the market's view that the current profit levels of semiconductor companies are "unsustainable" – with Micron's net profit surging 15-fold year-over-year last quarter and Samsung Electronics' operating profit jumping 17-fold, such growth rates are objectively impossible to maintain. Semiconductor firms are shifting from previous price-hike strategies to prioritizing volume over price, with the industry undergoing a "cycle reset at a high level." Once profitability is confirmed, valuations could potentially be re-rated.
DS Investment Securities holds a more reserved view on oversupply concerns. New capacity, including Samsung Electronics' Pyeongtaek fab, will not contribute meaningfully to market supply before 2035; the DRAM market will continue to face severe undersupply in 2026, again in 2027, with another supply deficit expected in 2031.
Earnings Season for US Tech Giants Begins, Could Be Key to Reversal
The market is currently turning its attention to the earnings season for major U.S. technology companies officially starting this week, viewing it as a crucial window to judge whether the semiconductor adjustment might end.
The earnings reports from AI-related companies being released from this week onwards will simultaneously test the sustainability of AI demand and whether semiconductor stocks can escape the困境 of de-leveraging and valuation compression, serving as a "watershed moment" for the current market trend.
For Alphabet, reporting on the 23rd, the market focus will be on changes to its 2026-2027 capital expenditure (CAPEX) guidance and the profitability of its cloud computing business. For Intel's report on the 24th, attention will center on whether server CPU shipments can recover.
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