The South Korean stock market has crashed again, the latest response from the Blue House

South Korea's stock market fell sharply on Thursday.

As of press time, South Korea's KOSPI index has dropped by more than 4%, currently at 6322.55 points. Among them, SK Hynix fell by more than 8% and Samsung Electronics fell by more than 5%.

In the Hong Kong stock market, the Southern Daily 2x Long Hynix ETF fell by more than 15%, and the 2x Long Samsung ETF fell by more than 11%.

US-listed storage giants' guidance missed market expectations sharply

The trigger for this round of sell-off is directly pointed at the "massive miss on earnings guidance" in the US storage sector overnight.

After the market closed on Wednesday Eastern Time, both SanDisk and Western Digital released their latest financial reports.

The financial reports show that the performance of the two major storage giants in the last fiscal quarter was unexpectedly strong, but their guidance for the current quarter failed to meet Wall Street's extremely high growth expectations.

Among them, SanDisk expects revenue in the next fiscal quarter to be between $10.3 billion and $10.8 billion, lower than the analysts' consensus expectation of $11.16 billion; Western Digital expects revenue in the next quarter to be between $4 billion and $4.2 billion, slightly higher than the analysts' expectation of $4.04 billion.

The "better-than-expected past" failed to fully offset the "slightly lower-than-expected future".

After the financial reports were released, the two major storage giants suffered a sharp sell-off, with SanDisk down more than 8% and Western Digital down more than 11%.

The pessimistic guidance from storage giants was quickly transmitted to Asian markets through the supply chain.

On Thursday, after the South Korean stock market opened, SK Hynix and Samsung Electronics faced huge selling pressure.

Data shows that as of the previous trading day, foreign investors had made a cumulative net purchase of 1.4513 trillion won in South Korea's comprehensive stock market, but on the 6th, they made a net sell-off of more than 500 billion won in the market.

Analysts pointed out that Asian markets ultimately have no pricing power and are subject to the trend of US stocks.

Han Ji-young, a researcher at Mirae Asset Securities, said that despite the improvement in the geopolitical and macro environment, affected by the weakening of the Philadelphia Semiconductor Index and profit-taking after the previous rapid short-term rise in stock prices, the market is highly likely to enter a stage of periodic consolidation and sector rotation.

"The abnormally amplified volatility during the July plunge has passed its peak." 

The Blue House's latest response

It is worth noting that after surging to a record high on June 19, South Korea's stock market has been falling with fluctuations. Over the past month, the South Korean KOSPI index has fallen by a cumulative 21.17%.

Facing the drastically volatile market, the South Korean government is taking emergency measures to "rescue the market".

Earlier, Kim Yong-beom, Director of the Policy Office of the South Korean Presidential Office, faced criminal charges for "hastily introducing leveraged ETFs".

In response, Seong Gi-hong, Senior Secretary for Public Relations and Communication of the South Korean Presidential Office, said in the latest response that it is more important at present to closely observe market conditions and formulate corresponding response measures.

"All relevant officials of the presidential office are carefully examining every situation and studying very cautiously how to formulate relevant measures." 

Last Friday, South Korea's financial regulator raised the minimum cash margin requirement for investing in single-stock leveraged ETFs.

After the regulator introduced restrictive measures, the trading volume of South Korean stock leveraged ETFs plummeted.

The latest data released by the Korea Exchange shows that the average daily trading volume of 16 single-stock leveraged ETFs fell to 919.8 billion won on Wednesday, falling below 1 trillion won for the first time since their listing on May 27.

Morgan Stanley pointed out that the previous drastic leverage deleveraging process is drawing to a close, and the KOSPI's valuation has fallen to an extremely low historical level, providing investors with a more attractive entry opportunity.

However, CITIC Securities holds a different view on this.

The institution believes that South Korean retail investors' leverage has been deleveraged rapidly, but the margin balance is still shrinking at the fastest pace this year, and the forced liquidation rate is still much higher than the normal level, so the subsequent market volatility is expected to remain at a high level.

Looking ahead, analysts said that after a long-term bull market, the global storage semiconductor sector has entered a stage of high sensitivity and high volatility, and short-term sentiment shocks need time to be digested.

In the medium and long term, Goldman Sachs firmly maintains the target of 12,000 points for the KOSPI index, expecting the market to still have about 80% to 90% upside potential.

The bank believes that current market pricing does not reflect the possible severe shortage of memory chips that could last until 2030. With the acceleration of AI computing demand, the semiconductor industry, which accounts for more than 50% of KOSPI's weight, will become the global profit engine.

JPMorgan Chase also maintains an optimistic view on SK Hynix and the memory chip industry, regarding this round of pullback as an opportunity to increase positions.

This article is from the WeChat Official Account "Gelonghui APP" (ID: hkguruclub), written by the editor of Gelonghui, and authorized for release by 36Kr.