KOSPI Slides 1.4% Below 5,500 as Foreign Selling Hits Seoul Stocks Ahead of SK Hynix and Samsung Earnings

South Korean stocks fell on Monday. The benchmark KOSPI dropped below the 5,500 mark as heavy foreign selling erased an early rebound. Investors also held back ahead of quarterly results this week from the country's two memory chip giants, SK Hynix and Samsung Electronics.

The KOSPI was down 77.38 points, or 1.39%, at 5,472.92 in the final minutes of trading. Market data later showed the index closing at 5,469.59, down 1.45%. The index had opened at 5,499.05 and briefly turned positive in early trade before sliding as much as 1.57% to an intraday low of 5,462.95.

The tech-heavy KOSDAQ did worse, falling more than 2% by late morning. That extended a 1.6% drop on Friday, as selling hit battery and semiconductor equipment stocks.

Foreigners head for the exits

Foreign investors again drove the decline. By late morning, they had sold a net 362.1 billion won (about $274 million) of KOSPI shares, which turned an early net buying position into a net sale. Individual investors bought a net 135.1 billion won and institutions a net 205 billion won, but that wasn't enough to keep the index in positive territory.

Foreign selling has hit Korea's market hard in recent weeks. On Oct. 13, the KOSPI plunged 5.46% in a single session, the day foreigners sold a net 4.51 trillion won of shares. Analysts at the time tied the rout partly to the end of large share buyback programs at Samsung Electronics and SK Hynix. Those buybacks had absorbed much of the selling pressure in previous months.

Lee Kyoung-min, an analyst at Daishin Securities, pointed to "the disappearance of the buffer provided by share buybacks" after that sell-off. He said "the market is already pricing in a 35 to 51 percent decline in earnings."

The KOSPI has now fallen more than 35% from its June peak.

Chipmakers diverge

The two largest stocks on the exchange moved in opposite directions for much of the day.

SK Hynix shares opened sharply higher after a newspaper report that the company planned a special dividend of about 16 trillion won ($12.1 billion). The report said that would be roughly 80% of an estimated 20 trillion won gain from selling its stake in Japanese flash memory maker Kioxia. SK Hynix rose about 1.9% early in the session, then gave back most of its gains after the company played down the report in a regulatory filing.

SK Hynix "is reviewing various shareholder return measures to enhance shareholder value, but nothing has been confirmed to date," the company said. It said any additional measures would be announced with its third-quarter earnings on Wednesday, Oct. 28, after a board resolution.

The chipmaker completed a 40 trillion won share buyback and cancellation on Oct. 21, about a month ahead of schedule.

Samsung Electronics fell about 1% during the session. It reports third-quarter results on Thursday.

Other large caps also declined. Hyundai Motor fell nearly 3% in late-morning trade, and LG Energy Solution fell about 1.6%. Construction, transportation equipment and chemicals stocks led the sector decliners, and insurance held up best.

Earnings test for AI trade

Strategists say this week's chip results will test whether record memory profits, driven by demand for artificial intelligence hardware, can steady a market shaken by doubts about whether huge AI spending will pay off.

Some brokers see the recent sell-off as overdone. In a note dated Sunday, Goldman Sachs cut its 12-month KOSPI target to 9,000 from 12,000. Even the lower target implies more than 60% upside from current levels. Goldman said the market "is pricing an overly negative fundamental outlook."

Investors are also watching reports that Samsung and SK Hynix plan to begin mass production of next-generation HBM4 high-bandwidth memory for Nvidia in the second quarter of next year.

Oil and Fed add pressure

Global factors added to the caution. Brent crude rose 3.1% on Friday to about $116.72 a barrel, its highest level since late April, after reports that the United States and Israel were weighing renewed strikes on Iran. Oil eased in Asian trade on Monday but stayed high.

On Wall Street, the S&P 500 fell 0.5% on Friday, and the 10-year U.S. Treasury yield hovered near 5%. The Federal Reserve announces its policy decision on Wednesday.

The won strengthened slightly against the dollar in early trade, to around 1,323.7 per dollar.

Elsewhere in Asia, Japan's Nikkei 225 fell 0.8%, and stocks in Taiwan and mainland China also declined.

Market participants expect volatility to stay high through the week as investors digest the chip earnings, SK Hynix's shareholder return announcement, and central bank decisions in Washington and Tokyo.

_This article is for information only and does not constitute financial advice._