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Korean Stock Market Dips After Briefly Surpassing 3,200 for the First Time in Nearly Four Years

Seoul, Yonhap – The Korean stock market retreated after hitting a high of 3,200, marking its first breakthrough of this milestone in nearly four years. Closing at 3,188.07, the benchmark KOSPI faced profit-taking pressure and short-term volatility. The rally’s momentum slowed amid ongoing concerns about corporate earnings and uncertainty surrounding U.S. tariff negotiations.

Following a strong start, KOSPI struggled to maintain levels above 3,200, dipping into the 3,180 range before closing just shy of last week’s highs. Investors kept a cautious eye on U.S. inflation data, further tempering the enthusiasm. Despite rotational buying across sectors, the market faced headwinds with fears of overvaluation stemming from its rapid gains.

Individual investors were quick to lock in profits, but foreign investors showed notable confidence by maintaining a net buying trend, signaling their renewed interest in Korean equities. Key events driving market sentiment this week include Q2 earnings reports from major corporations and developments in U.S. tariff negotiations, both of which may significantly influence market directions.

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KOSPI Performance and Major Influencing Factors

As of July 18, KOSPI closed at 3,188.07, reflecting a modest 0.38% rise compared to the previous week. Despite surpassing the 3,200 benchmark earlier, resistance levels proved challenging amid limited trading ranges and a lack of definitive catalysts. Heightened concerns over steep U.S. tariffs targeting goods from the EU and Mexico also weighed on investor optimism.

In the U.S., economic data offered mixed signals. The June Consumer Price Index (CPI) climbed 0.3% from the previous month, accelerating from May’s 0.1%, thus stoking inflation concerns. However, unexpectedly strong June retail sales, which rose 0.6% month-over-month (surpassing forecasted growth of 0.1%), helped ease worries about a potential consumption slowdown—though this positive data failed to spark a KOSPI rally.

Domestically, investor sentiment was cautious as Q2 earnings began rolling in. Many participants were awaiting results to determine whether actual corporate earnings aligned with subdued profit expectations. On July 17, Samsung experienced a significant legal victory as the Supreme Court acquitted its vice chairman, Lee Jae-yong, of long-standing accusations involving unfair trading and corporate misconduct. This resolution cleared a decade-long cloud over Samsung stocks, boosting investor confidence in the conglomerate.

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Foreign Investor Activity and Sectoral Trends

Foreign investors aggressively returned to the Korean market, recording net purchases totaling 875.9 billion KRW between July 14–18. This surge was fueled by strong demand for semiconductor stocks (1.2576 trillion KRW), capital goods (539.9 billion KRW), and hotel & leisure companies (48.5 billion KRW). Meanwhile, significant net selling occurred in software (388.3 billion KRW), banking (273.4 billion KRW), and insurance stocks (230.6 billion KRW).

Conversely, individual investors were net sellers, offloading 942.1 billion KRW, while institutional investors also contributed to selling pressure with net outflows of 473.5 billion KRW. Sector performance showed gains in transportation equipment (+3.71%), machinery (+2.72%), electronics (+1.82%), manufacturing (+1.74%), and pharmaceuticals (+1.53%). However, declines were observed in securities (-5.57%), IT services (-3.20%), financials (-2.52%), and utilities (-2.44%).

The KOSDAQ index demonstrated stronger momentum as it closed at 820.67, up 2.52% from the prior week, buoyed by robust buying interest in mid-to-small cap stocks.

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Market Outlook: Focusing on Macro Risks and Q2 Earnings

Looking ahead, market sentiment may remain cautious as participants weigh the risk of peaking Q2 earnings momentum and focus on the August 1 deadline for critical U.S. tariff negotiations. Concerns about rising valuations following recent market rallies may also contribute to this uncertainty.

Leading analyst Yoo Myung-gan of Mirae Asset Securities noted, “Domestic corporates are expected to face decelerating profit momentum and slower growth rates in the second half. Macro risks, such as inflation, tariffs, and interest rate policies, compound valuation challenges created by recent rallies.”

Similarly, Park Seung-young of Hanwha Investment & Securities highlighted potential shifts in market dynamics. “The KOSPI is showing signs of fatigue, with trading turnover ratios dropping from 3x to slightly above 2x, indicating waning momentum. Key policy changes, including upcoming tax reforms slated for late July, may have profound effects on long-term market valuations.”

Kyung-min Lee from Daishin Securities added, “Progress—or lack thereof—in U.S. tariff discussions as we approach the August 1 deadline could significantly impact global equities and Korean stocks alike. Combined with critical economic data releases, these developments will shape near-term investor sentiment.”

Against this backdrop, market participants may pivot toward rotational buying strategies to align portfolios with revised valuations as markets adapt to mixed signals.

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Key Q2 Earnings Reports and Economic Events

The Q2 earnings season is set to intensify, with major announcements expected from global and domestic players. Notable reports include Alphabet and Tesla on July 23, along with Samsung Biologics, SK Hynix, Hyundai Motor, KB Financial, HD Hyundai Heavy Industries, Samsung Heavy Industries, and LG Household & Health Care on July 24. These earnings could have pivotal effects on stock movements.

Investors should keep a close eye on the following domestic and global economic data releases (Korea Standard Time):

• July 21: South Korea’s July 20-day export data (YoY) and China’s Loan Prime Rate (1-year and 5-year)
• July 22: South Korea’s July Producer Price Index (PPI, YoY)
• July 23: U.S. June existing home sales (MoM)
• July 24: U.S. initial jobless claims, South Korea’s Q2 GDP (YoY), Eurozone’s ECB monetary policy decision (Deposit Rate)
• July 25: U.S. June durable goods orders (Preliminary)

With Q2 earnings pivotal and macroeconomic risks looming, traders should brace for volatility while closely monitoring corporate data and market trends.

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