US long-term yields surged during the holiday and overshadowed good news from the US-China summit and US-Iran talks, pushing KOSPI below 7,000 for the first time in four sessions
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On September 28, the first trading day after the Chuseok holiday, KOSPI closed at 6,889.74, down 191.18 points, or 2.70%. It was the first close below 7,000 in four sessions. The main driver was a surge in US long-term Treasury yields while Korean markets were closed. The 30-year yield briefly hit 5.519%, its highest level since June 2004, and the 10-year yield rose above 5%. Foreign investors net sold about 3.6 trillion won of KOSPI shares, with the selling concentrated in Samsung Electronics and SK Hynix, which each fell about 5%. Positive news, including the US-China summit and hopes for US-Iran talks, was not enough to lift sentiment, as analysts said the yield spike weighed on risk appetite. KOSDAQ bucked the trend, rising 0.25% to 846.58.
Korean markets were closed for the holiday, but global markets kept moving. US Treasury yields climbed sharply in the meantime, and on Monday, September 28, the bill came due all at once. Plenty of news could have been read as positive, yet the market barely responded. Here is a look at why.
What Happened During the Holiday: US Long-Term Yields Surge
According to market reports published that day, US Treasury yields rose to 4.91% for the 2-year, 5.21% for the 10-year and 5.52% for the 30-year. The 30-year yield briefly touched 5.519% during the holiday, the highest since June 2004.
Several factors combined to push yields up. The US S&P Global composite PMI for September came in at 58.4, the highest since July 2021. Federal Reserve Governor Michael Barr mentioned the need for further rate hikes, and a 5-year Treasury auction drew weak demand. In other words, signs of a resilient economy ended up adding to rate pressure. Some analysts also point to expectations that the Fed, which raised rates in mid-September for the first time in three years, will hike again at next month’s FOMC meeting.
Foreigners Sell More Than 3 Trillion Won of Samsung and SK Hynix
By eToday’s tally, foreign investors net sold 3.6010 trillion won and institutions net sold 1.3330 trillion won, while individual investors net bought 3.2866 trillion won and absorbed the supply. The selling was concentrated in large-cap semiconductor stocks. According to Herald Business, foreigners net sold 1.7275 trillion won of SK Hynix and 1.3757 trillion won of Samsung Electronics.
The price declines were steep. Samsung Electronics fell 5.43% and SK Hynix fell 5.05%, while Samsung Electronics preferred dropped 5.91% and SK Square lost 7.56%. Hanmi Semiconductor also declined 3.70%. By sector, electric and electronics fell 4.46% and led the index lower. Shinhan Investment Corp. analyst Kim Ki-baek said selling was centered on large-cap chip stocks, which carry heavy valuation burdens in a high-rate environment.
Stock-specific negatives piled on as well. News that Oracle had notified AI data center developers of force majeure, citing power supply disruptions, shook sentiment across the AI value chain. Speculation that SK Hynix’s US grandchild company Solidigm could pursue an IPO also raised concerns about dilution of existing shareholders’ stakes.
There Was Good News: The US-China Summit and US-Iran Talks
The external news during the holiday was not all bad. At the US-China summit held in Washington, D.C. from September 23 to 25, the two sides agreed to extend their existing trade deal by two months and to apply preferential tariffs to $30 billion worth of non-sensitive goods. eToday also reported that China agreed to import US coal in 2027 and 2028.
Assessments were mixed, however. The two sides announced their results through separate fact sheets and eight-point agreements rather than a joint statement, and Seoul Economic Daily reported that President Xi Jinping personally urged Washington to oppose Taiwan independence. US experts viewed the summit as an extension of a fragile truce rather than a resolution of underlying conflicts. Core issues such as tariffs, rare earths and advanced-technology controls were pushed to follow-up talks. Daishin Securities analyst Lee Kyung-min likewise said the summit’s significance lay in easing fears of a short-term re-escalation rather than fundamentally resolving trade tensions.
The mood around US-Iran relations also shifted within a day. Indirect talks were held with Qatari mediation, but President Trump rejected Iran’s proposal. On September 27 (US time), however, he said he expects further talks this week, which eased anxiety somewhat. The two sides remain far apart over reopening the Strait of Hormuz and the nuclear issue, but dialogue is expected to continue. International oil prices approached $100 a barrel before WTI and Brent each fell by around 2% on the day.
Not Everything Fell: Mixed Sectors and KOSDAQ
The index dropped sharply, but not every stock was weak. Chemicals (+3.20%) and construction (+3.05%) were strong, and among top market-cap stocks, LG Energy Solution rose 3.56%, Samsung Biologics 2.49% and KB Financial 0.58%. KOSDAQ closed up 0.25% at 846.58, supported by stocks with company-specific catalysts, such as HLB, which surged 29.95%.
Views on semiconductors are also divided. The same day, Daishin Securities said market concerns about SK Hynix’s HBM quality and overseas plant investment were excessive, maintaining a buy rating and a target price of 3.2 million won. Herald Business, meanwhile, noted that September 28 was also when dividend-driven buying of Samsung Electronics wrapped up. Short-term flows and the medium-to-long-term earnings outlook can tell different stories.
Points for Investors to Keep in Mind
- Interest rates are the top variable. With the 30-year yield in the mid-5% range and the 10-year above 5%, growth stocks with heavy valuation burdens can react especially sensitively. Keep watching how rate expectations shift ahead of next month’s FOMC meeting.
- One day of flows does not make a trend. Overseas developments that built up during the holiday were priced in all at once on the first trading day, and individual investors’ net buying of more than 3 trillion won cushioned the drop.
- Good news and risks coexist. The US-China trade truce was extended by only two months, and the US and Iran remain far apart. Either outcome could change the market’s direction.
- Check for sector concentration. When semiconductors wobble as they did on this day, the whole index can swing sharply. This article is for informational purposes only and is not investment advice.
In sum, the day’s KOSPI plunge had more to do with the belated pricing-in of a US long-term yield surge during the holiday than with domestic bad news. Good news from the US-China summit and US-Iran talks was offset by rates, and semiconductor-specific factors, including the Oracle data center issue and speculation over a Solidigm IPO, added to the pressure. For now, the market’s attention is likely to stay on the direction of US rates, foreign investor flows and the additional US-Iran talks expected this week.
References
- eToday — Surge in US Treasury Yields Swallows Positive External News; KOSPI Closes in the 6,880s (etoday.co.kr)
- Herald Business — KOSPI Falls Below 7,000 Again as Foreigners Dump Samsung and SK Hynix (biz.heraldcorp.com)
- Newstomato — KOSPI Falls 2.7% on Surging US Treasury Yields, Breaking Below 6,900 (newstomato.com)
- News1 — KOSPI Closes at 6,889.74, Down 2.70%; KOSDAQ Up 0.25% (news1.kr)
- Financial News — US and China Extend Trade Truce by Two Months; Gaps Remain on Key Issues (fnnews.com)
- Seoul Economic Daily — US-China Summit: Red Carpet Rolled Out, Taiwan Pressure in Return (sedaily.com)
- Special Times — US-China Summit Seen as Extension of Fragile Truce; AI, Taiwan and Iran Remain Variables (specialtimes.co.kr)