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Weekly Market Review: Week 31 (July Week 5)

A Week of Structural Leverage Liquidation - a -10.84% Black Tuesday Triggered by ChangXin Memory's Listing and Circular-Investment Suspicion, a Three-Day Chain Down to 5,593.56, and a +17.91% Friday in Which 7.22 Trillion Won of Foreign Buying Handed Back 1,001 Points in a Single Day

HHaelangdal·Founder AnalystAugust 1, 202615 min readWeekly Review
Bottom Line

A week in which news made the first step and leverage made the rest. KOSPI opened quietly at +0.97% (6,755.75) on Monday, then plunged -10.84% (6,023.66) on Tuesday on memory self-sufficiency fears from the ChangXin Memory listing and suspicions of circular investment in AI - Samsung Electronics -13.39%, SK Hynix -14.65%, foreigners net selling 4.97 trillion won, with a sidecar and a first-stage circuit breaker firing. The liquidation extended through -5.98% (5,663.24) on Wednesday and -1.23% (5,593.56) on Thursday to set the week's low, before Friday's 7.22 trillion won of foreign net buying drove a +17.91% surge to 6,595.45 and a record 1,001-point gain. The week lost only -1.42% but traveled a 6,755-5,593 range, near 17%. Over the same stretch the S&P 500 gained just +1.05% - what made -10.84% in a day was not a global repricing but a local Korean forced liquidation built on crowding in leveraged exchange-traded products and the yen carry unwind, and what made +17.91% in a day was the end of that same liquidation.

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Reader's Brief — 30-second TL;DR

Intermediate
Why Now

7/27 KOSPI +0.97% (6,755.75) retraces part of the prior week's drop, and China's ChangXin Memory lists the same day -> 7/28 memory self-sufficiency fear and spreading circular-investment suspicion drive a -10.84% (6,023.66) Black Tuesday, Samsung Electronics -13.39%, SK Hynix -14.65%, foreigners net selling 4.97 trillion won, a sell-side sidecar and a first-stage circuit breaker -> 7/29 -5.98% (5,663.24) as the liquidation extends -> 7/30 -1.23% (5,593.56), the week's low, -17.2% from Monday -> 7/31 foreigners net buy 7.22 trillion won (SK Hynix 3.61 trillion, Samsung Electronics 2.12 trillion) as concern over the durability of AI investment eases and big-tech results confirm spending: +17.91% (6,595.45), a record 1,001-point gain -> the week -1.42%. Over the same stretch the S&P 500 went 7,411.98 -> 7,489.72 (+1.05%), and Microsoft's capex guidance of $190 billion -> $175 billion was confirmed as an accounting reclassification.

Winners ?? Losers

What broke the week - self-sufficiency fear from the ChangXin Memory listing, suspicion of circular investment in AI, crowding in leveraged exchange-traded products, the yen carry unwind, foreigners net selling 4.97 trillion won on 7/28, Samsung Electronics -13.39%, SK Hynix -14.65%. What handed it back - foreigners net buying 7.22 trillion won on 7/31 (SK Hynix 3.61 trillion, Samsung Electronics 2.12 trillion), easing concern over the durability of AI investment, big-tech results, and Microsoft's capex cut confirmed as an accounting reclassification. Monitoring - the 30-million-won deposit rule on 8/5 and leveraged product assets, the durability of foreign net buying, numerical testing of the self-sufficiency and circular-investment stories, and what remains of the yen carry unwind.

Watch For

Reading depth
  1. 01Mon 7/27 - A Quiet Retracement (+0.97%) and a Chinese Memory Listing the Same Day7/27's +0.97% (6,755.75) passively unwound the prior week's drop - and ChangXin Memory, Tuesday's trigger, listed on the same day.Jump to section
  2. 02Tue 7/28 - Black Tuesday -10.84%, a Sidecar and a Circuit Breaker7/28's -10.84% (6,023.66) was a day when self-sufficiency fear and circular-investment suspicion pulled the trigger and forced liquidation set the size - Samsung Electronics -13.39%, SK Hynix -14.65%, foreigners net selling 4.97 trillion won.Jump to section
  3. 03Wed 7/29 - Thu 7/30 - The Liquidation Extends, a Weekly Low of 5,593.56Two more sessions, -5.98% and -1.23%, carried the index to a weekly low of 5,593.56 - a stretch in which remaining supply was absorbed with no fresh bad news.Jump to section
  4. 04Anatomy of the Liquidation - Leveraged Crowding and the Yen Carry Unwind, an Amplifier With No DirectionThe size of the drop was set not by the intensity of the news but by crowding in leveraged exchange-traded products and the yen carry unwind - the same amplifier ran in reverse to make Friday's +17.91%.Jump to section
  5. 05Fri 7/31 - +17.91%, a Record 1,001-Point Gain7/31's +17.91% (6,595.45) was a buy-back made by 7.22 trillion won of foreign net buying - the size, 1,001 points, is itself evidence of how mechanical this phase has been.Jump to section
  6. 06Week in Comparison - the 17% Amplitude Hidden Inside -1.42%, and America's +1.05%KOSPI's -1.42% week contained a 17% amplitude while the S&P 500 gained just +1.05% - the same news met a different structure of positions.Jump to section
  7. 07Next Week's Outlook - the 8/5 Rule and the Durability of Foreign FlowsNext week, in a market whose cushion the 8/5 deposit rule has thinned, the question is whether Friday's buy-back was a confirmed floor or the liquidation's final stage.Jump to section

Mon 7/27 - A Quiet Retracement (+0.97%) and a Chinese Memory Listing the Same Day

The week's first session was a rebound. KOSPI closed +0.97% higher at 6,755.75, retracing part of the prior Friday's -5.72% plunge.

A retracement without conviction

The week before, KOSPI had handed back three days of rebound one on Alphabet's capex headwind. Monday was a mild session that unwound that oversold move. That the gain failed to clear 1% shows the market's temperature - this was less a reclaimed direction than a passive acknowledgment that the drop had gone too far.

The Chinese memory listing that same day

China's ChangXin Memory listed on the same day. It was the first item the previous review had flagged on the coming week's calendar. The market did not price the event heavily on the day itself, domestic memory large caps stayed quiet.

7/27 looked like a day on which nothing happened - yet Tuesday's trigger was already sitting in the market.

Takeaway

7/27's +0.97% (6,755.75) passively unwound the prior week's drop - and ChangXin Memory, Tuesday's trigger, listed on the same day.

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This report is provided for informational purposes only and does not constitute a recommendation to buy or sell any financial instrument. Investment decisions should be made based on your own judgment and responsibility. The analysis and opinions contained herein are based on information available at the time of writing and are subject to change.

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