The KOSPI has been pushed down to the 7,400 level. Samsung Electronics posted record earnings, yet the market sold instead. It looks strange, but it happens fairly often in the stock market. The market didn’t fall for lack of good news; it fell because it had already expected too much good news.
The core of this drop is not weak earnings. Samsung Electronics reported preliminary second-quarter 2026 results of KRW 171 trillion in revenue and KRW 89.4 trillion in operating profit. On the numbers alone, that is literally a record. Yet the stock fell, and the KOSPI plunged intraday. When good earnings come out and the market still collapses, it means investors are weighing future expectations and price burden more heavily than current earnings.
- Why did the market sell despite strong earnings?
Stock prices reflect the future before the present. Samsung Electronics, SK hynix and AI chip stocks had already risen a lot on big expectations. The market more or less knew Samsung Electronics would post good results, and that expectation was already in the share price.
So after the earnings release, the mood of “Let’s lock in profits first” grew stronger than “Is there any reason left to buy?” This is “sell the news.” It is the classic pattern in which a stock that rose on expectations falls once the actual news comes out.
Sell the news
A pattern in which a stock rises first on expectations, then, when the actual announcement or result arrives, investors decide the reason to buy is gone and start selling.
Fatigue from the AI chip rally piled on top. This year’s rise in the Korean stock market centered on AI, HBM, chip equipment, substrates and power infrastructure. But the faster the rise, the more the market asks again: “Will these profits last?”, “Will AI investment really make this much money?”, “Have stock prices run too far ahead?” The moment these questions grow, even good earnings can become a reason to sell in the short term.
- The problem was flows, not earnings
This plunge is hard to explain with corporate earnings alone. The bigger problem is supply and demand. When foreign selling, the unwinding of leveraged positions, program selling and concentration in large chip stocks all hit at once, the index can collapse much faster than expected.
The KOSPI in particular is heavily influenced by Samsung Electronics and SK hynix. When both stocks wobble at the same time, the whole index wobbles. And if a lot of leveraged money had piled into AI chip stocks, then once the drop begins, stop-loss selling and forced liquidations feed the decline further.
Leveraged investing
Investing on a larger scale than the money you actually have, using borrowed money or derivatives. Gains can grow in a rising market, but in a falling market losses and selling pressure can also grow quickly.
In the end, today’s market is less “a market that fell because earnings were bad” and more “a market that expected too much, crowded in too much and sold too fast.”
- So how cheap is the Korean stock market now?
Here is the key point. The KOSPI at the 7,400 level is not just “down a lot”; on valuation, it has entered historically undervalued territory.
With the KOSPI around 7,430, the 12-month forward P/E has dropped to about 6.43 times. Given that the average over the past 10 years is around 10 times, the Korean market is trading far below its average. Put simply, you can buy a market earning the same profits much more cheaply than in the past.
12-month forward P/E
The current share price divided by the company’s expected earnings over the next 12 months. A lower number means the stock is cheap relative to earnings, but if expected earnings fall, the P/E can change again.
The more important comparison is the 2008 global financial crisis. Historically, it has been rare for the KOSPI’s 12-month forward P/E to fall below 7 times. A P/E in the 6s now can be read as a sign that the Korean market has entered not an ordinary correction but a zone where a good deal of fear is priced in.
- Cheap doesn’t always mean the bottom
Of course, cheap doesn’t mean prices will rise right away. In the stock market, undervaluation and a bottom are different. Undervaluation is about price; a bottom is about sentiment and flows. On price alone, the Korean market has become cheap, but investor sentiment is still shaky and flows are still weak.
So the important question now is not “Will it fall further?” The more important question is “Will the earnings outlook hold?” If Samsung Electronics’ and SK hynix’s earnings keep improving and AI chip demand actually turns into profit, today’s P/E in the 6s may be seen as historically undervalued. If the earnings outlook breaks down instead, even a P/E that looks low may lose its meaning.
In the end, this is not a point where you can declare a bottom. But on price alone, it is a zone that has become far too cheap to abandon out of fear.
- If it rebounds, what moves first?
If the market recovers, the first to react will likely be the sectors hit hardest in this drop: AI chips, HBM, substrates, power infrastructure and chip equipment, sectors where the direction of earnings is still intact.
The sectors that fall most in a downturn come in two kinds. One falls because something really went wrong; the other wobbles for a while because it rose too much. If the direction of AI chip earnings holds, this plunge may be closer to the latter.
But a short-term rebound and a long-term rise are different. A technical rebound can come after a plunge, but earnings forecasts have to keep rising to push past the high again. In the end, what lifts stock prices again is not relief from fear but earnings.
BITPRESS Insight
KOSPI 7,400 is a number of fear. But it is also a number of price. When everyone sells out of fear, the market sometimes gets abnormally cheap. The Korean market is now in a position to raise that question.
Samsung Electronics’ earnings were strong, and it is hard to say the AI chip story is over. Yet the market collapsed all at once on leveraged flows, profit-taking and AI rally fatigue. So this drop is less a decline caused by broken companies and more a decline caused by collapsing expectations and flows.
There is no way to know whether this is the exact bottom. But a P/E in the 6s is clearly not a light number. While the market talks of fear, the numbers talk of undervaluation. The Korean market now stands at a crossroads: is it “a market to run from,” or “a market so cheap it deserves a second look”?
Sources
Samsung Electronics announces preliminary Q2 2026 earnings, Samsung Newsroom Korea
https://news.samsung.com/kr/-2026-2--
Samsung flags 19-fold jump in profit, but shares slump on jitters AI boom may stall, Reuters
https://www.reuters.com/world/asia-pacific/samsung-estimates-19-fold-rise-q2-operating-profit-beating-expectations-2026-07-06/
Morning Bid: Samsung boom, market gloom, Reuters
https://www.reuters.com/world/china/global-markets-view-europe-2026-07-07/
[News Now] Samsung Electronics’ ‘stock plunge’ despite record earnings… why?, YTN
https://www.ytn.co.kr/_ln/0102_202607071259478517
[Breaking] KOSPI plunges 8%, triggering circuit breaker… sixth this year, Kyunghyang Shinmun
https://v.daum.net/v/20260707135746719
KOSPI plunges 7.9% to 7,648 on ‘chip collapse’… KOSDAQ also down 6.7%, Yonhap News
https://www.yna.co.kr/view/AKR20260702137900008
Kwon Yong-heon, PB at Korea Investment & Securities Sinchon PB Center, comment on the KOSPI plunge
Based on the original promotional comment provided; public link could not be verified
