Foreigners Bought Korean Chips for a Second Day and Retail Sold Into It

The Kospi closed at 6,345.53 on Tuesday, up 45.87 points or 0.73 percent, a second consecutive rising session. Samsung Electronics gained 4.13 percent to 239,500 won and SK Hynix edged up 0.35 to 1.42 million. The index had opened lower before the chip heavyweights turned it around.

The flows are the story, not the level. Foreign investors bought a net 445.8 billion won and institutions a net 319 billion. Retail investors sold a net 724.4 billion. That is a complete reversal of what happened during the crash, when institutions were net sellers of 2.16 trillion won on the 28th of July while retail bought 2.27 trillion.

Retail bought the falling knife and is now selling the bounce, which is the oldest pattern in any equity market and the reason the finance ministry specifically named single-stock leveraged products launched in May as the cause of the July damage. Those positions get liquidated on the way down and the survivors take the first exit on the way up.

The month it is recovering from was severe by any standard. The Kospi fell 22.19 percent across July, tripped circuit breakers on the 28th and again on the 29th, the first time on consecutive days in its history, then posted a 17.91 percent single-day gain on the 31st, the largest since the index began. Samsung finished July down about 21 percent and SK Hynix 35 despite that rebound.

The valuation gap has not closed with the price. Even after the recovery, Samsung and SK Hynix have been trading at roughly half of the average analyst target price, and several brokerages have started cutting their numbers rather than waiting for the market to come to them. Mirae Asset took its Samsung target down about a third and its SK Hynix number from 4.2 million won to 2.8 million.

The won firmed 2.4 to 1,416 per dollar, which is consistent with the foreign buying rather than causing it. An analyst put the move down to bargain hunting on a perception that the recent decline had been excessive. That is an honest description and not a thesis, which is roughly where this market is. Samsung reported an operating margin of 52.2 percent in July and told its call the memory shortage worsens through 2027 and into 2028, so the fundamentals have not changed once in either direction through a 22 percent monthly fall and a record single-day gain.