Korean Stock Market News Summary

📉 SK Hynix Shares Plunge on Earnings Miss

SK Hynix shares experienced extreme volatility, swinging from +4% to -19% before settling at -9%, barely holding the 1.4 million KRW level. The sharp decline follows disappointing earnings that fell below market forecasts. Key factors driving the sell-off include:

• A steep drop in SK Hynix’s U.S. ADR price, which fell 8.98% over three consecutive sessions
• Growing overhang concerns stemming from potential large-scale selling pressure tied to ADR-to-local share conversions

This comes on the heels of Samsung Electronics also seeing a ~6% share price drop despite posting a record-breaking 89 trillion KRW operating profit in Q2.

🚫 94% of Brokerage Accounts Blocked from Buying Leveraged ETFs

A significant policy issue has emerged, with 94% of stock brokerage accounts unable to purchase leveraged ETFs — reportedly linked to a 30 million KRW threshold requirement.

Key points raised by lawmakers:

• Leveraged ETF programs inherently execute buy/sell transactions in underlying assets, including Samsung Electronics and SK Hynix in the spot market via futures and hedging mechanisms
• Lawmaker Yoo criticized financial regulators, questioning whether policymakers fully understand the market mechanics behind such restrictions
• Concerns were raised about the competency of financial market officials in designing equity market policies

📊 Samsung & SK Hynix: How Did It Come to This?

Amid the sharp market downturn, analysts highlighted stark valuation disparities:

Despite the current weakness, securities analysts maintain that the KOSPI still has room for a second-half rebound, advising investors to hold existing positions and await a recovery opportunity rather than panic-selling.

🚗 Hyundai Motor Labor Negotiations Stall Before Summer Break

Wage and collective bargaining talks at Hyundai Motor have failed to conclude ahead of the company’s summer vacation period, pushing negotiations into a prolonged phase.

• With the first week of August falling during Hyundai’s scheduled summer recess following a partial strike, talks cannot resume until mid-August at the earliest
• The company’s third proposal included:
  • Monthly base salary increase of 89,000 KRW
  • Performance bonus of 350% + 10 million KRW
  • Distribution of 15 company shares per employee
• Unions have yet to accept the offer, raising the risk of further industrial action

Sources: Korean financial media | Summary date: July 2024