Benchmark tumbles nearly 13%, triggering circuit breaker for second straight day
South Korean stocks extended their historic sell-off Wednesday: The Kospi once plunged nearly 13 percent to below 5,300 and triggered a circuit breaker for a second straight day amid heavy selling by retail and foreign investors.
The Kospi ended regular trading at 5,663.24, down about 6 percent, after opening 1.09 percent higher at 6,089.11.
The benchmark quickly reversed course and sank to 5,262.77, down 12.63 percent from the previous close. The slide took the index below the 5,300 mark for the first time in nearly six months.
A circuit breaker was triggered on the Kospi at 12:32 p.m., marking the first time the measure had been activated for two consecutive sessions on the benchmark market.
Trading on the secondary Kosdaq market was also halted after the index fell more than 8 percent, marking the first time circuit breakers had been triggered on both markets for two consecutive sessions.
Retail and foreign investors were net sellers on the Kospi, with retail investors offloading nearly 2 trillion won ($1.38 billion) and foreign investors selling a net 1.23 trillion won. Institutional investors were net buyers of around 3.16 trillion won.
Selling was concentrated in heavyweight semiconductor stocks. Samsung Electronics and SK hynix both fell by double digits at one point, exerting outsized pressure on the benchmark.
At the 3:30 p.m. close of regular trading, Samsung Electronics ended down 5.23 percent at 208,500 won, while SK hynix fell 9.61 percent to 1,401,000 won.
SK hynix extended its losses after reporting second-quarter operating profit of 60.5 trillion won, more than six times the year-earlier figure but below market expectations of roughly 64 trillion won. Its earnings failed to ease concerns that valuations and investment spending across the artificial intelligence industry had outpaced near-term returns.
The renewed losses followed Tuesday's global semiconductor sell-off, fueled by concerns over China's growing competitiveness in memory chips and progress in domestically produced chipmaking equipment. The strong market debut of Chinese memory chip-maker ChangXin Memory Technologies further unsettled investors in Korean chipmakers.
"Today's plunge goes well beyond what can be considered a normal market move," said Han Ji-young, an analyst at Kiwoom Securities. "The sell-off appears to be driven largely by capitulation, as hopes for a rebound after Tuesday's 10 percent drop faded and investors rushed to cut their losses."
Han said weaker-than-expected earnings from SK hynix, reduced expectations for shareholder returns and renewed uncertainty over US-Iran negotiations had helped trigger the decline. Worsening sentiment and surging trading in single-stock inverse products were further amplifying volatility, he added.
"Sentiment has deteriorated so sharply that many investors now doubt the current level marks the bottom, even though valuations have fallen to unprecedented lows," Han said.
Wednesday's decline came after the Kospi tumbled almost 11 percent Tuesday to close at 6,023.66, its steepest daily fall since early March. Foreign investors sold nearly 5 trillion won of Kospi shares that day, while retail investors absorbed much of the selling with net purchases of about 4.3 trillion won.
The latest slide deepened a sharp reversal from the AI- and semiconductor-driven rally that had lifted the Kospi to an intraday record of 9,385.59 on June 19. At Wednesday's low, the index was down 44 percent from that peak.
By Choi Ji-won (jwc@heraldcorp.com)
