Kospi: Even a 19-fold profit at Samsung is not enough to calm the panic

Trees do not grow to the sky. On Thursday, July 30, Samsung Electronics reported the most spectacular quarterly profit in its recent history. Despite this, the Kospi ended the session in the red. The benchmark index of the Seoul Stock Exchange, which had doubled in value in the first half of the year driven by an almost religious fervor for AI-related semiconductors, has now experienced its third consecutive session under extreme tension since Wednesday. The leverage that had fueled the rise is now turning against the same investors who had supported it, even when corporate results exceed all expectations. Key points of this article:

• Samsung revealed an extraordinary operating profit, increasing by 1,814% year-on-year.
• Despite this historic performance, the Kospi finished down, plunging by 1.23%.

A historic profit that changes nothing

Yet the shock of the day comes from a record. Samsung Electronics announced an operating profit up by 1,813.8% year-on-year, to 89.49 trillion won (approximately 62 billion dollars), a level that breaks its own record for the third consecutive quarter and propels the group to the top of the global semiconductor manufacturers in terms of quarterly results, according to TradingKey.

Fueled by this announcement, the Kospi surged by over 5% in the morning, flirting again with the 6,000-point threshold (an intraday high of 5,976 points). But the celebration was short-lived: profit-taking and movements towards safer values undermined the rebound, and the index ended the session down by 1.23%, at 5,593.56 points. SK Hynix closed down by 5.64%, while Samsung finished nearly stable (-0.72%): a striking contrast to the 7% surge of its own stock during the session.

Three sessions in a row, one verdict

This day's relapse is just the latest episode of a scenario that has been repeating since Wednesday. The Kospi had already fallen by 10.84% on July 28, its worst session since the historic crash in March, before following up the next day with another plunge of 5.98%, to 5,663.24 points, its lowest closing level since April. Two sessions were enough to erase nearly 40% of the index's value since its June record, with two consecutive days of circuit breaker triggers marking an absolute first in the index's history, the ninth activation of this type this year in South Korea.

Ironically, SK Hynix also reported a record quarterly profit on July 29 and raised its annual investments beyond 40 trillion won. Due to a lack of clarity on its shareholder return policy, the market punished the stock with an intraday drop of over 18%.

A symptom, not an isolated case

The doubt gripping South Korea is not a local accident, nor an isolated problem for Samsung or SK Hynix. The extreme concentration of the index on these two giants, already pointed out during the previous Kospi surge, turns every earnings report into a test of truth for the entire Korean market: when one of the two coughs, or even when one of the two breaks records, the entire index wobbles.

Concerns about potential overcapacity in AI production and the rise of Chinese competition in memory chips are weighing on the entire sector, well beyond Seoul: Korea is merely a condensed version, on a smaller scale, of a nervousness that is gradually spreading to all AI-boosted markets.

The mechanism of margin calls continues to amplify every movement. About 1.2 million accounts using leverage (borrowing to invest more than their available capital) had already received cascading calls as early as Wednesday's session, forcing automatic sales that feed the spiral. This mechanism alone explains why even a dazzling corporate result is no longer enough at this stage to sustainably reverse the trend.

This wide gap between record profits and an index that continues to plunge says something important about the current nervousness of AI-boosted markets: confidence has shifted to distrust, and no figure, even historic, is enough to restore it in one fell swoop. The precedent of the cryptocurrency rebound during the previous Korean correction shows that parallel markets do not always react as one would expect to such shocks.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.