South Korea’s benchmark Kospi suffered one of its steepest one-day falls of the year on Thursday, closing down 7.57% at 5,554.22 as a rout in chipmakers Samsung Electronics and SK hynix forced a market-wide trading halt, The Korea Herald reported. It was the index’s lowest close since April and the first time since late July that it ended in the 5,500 range.
The sell-off began at the open, with the Kospi starting the session 5.59% lower. A sell-side sidecar, which temporarily suspends program sell orders linked to index futures, kicked in at 9:07 a.m. By 12:38 p.m. the decline was deep enough to trip a circuit breaker that froze all trading for 20 minutes. At its worst point the index touched 5,450.81, a drop of more than 9%.
The tech-heavy Kosdaq fared no better, finishing 7.65% lower at 760.82 after triggering its own sidecar and circuit breaker. According to the Herald, it was the first day since July 29 that both Korean markets halted trading on circuit breakers. Reuters said the activation was the Kospi’s tenth this year and the 16th in its history, and noted the index had now fallen for seven sessions in a row, its longest losing run since September 2024.
Chip heavyweights lead the decline
Memory chipmakers, which have powered much of Korea’s rally on the back of AI demand, bore the brunt of the selling. SK hynix closed 11.06% lower at 1.26 million won, while Samsung Electronics dropped 9.48% to 210,000 won after sliding below 205,000 won during the day. Samsung Electro-Mechanics tumbled 15.36% and holding company SK Square lost 10.21%. Reuters reported that only 113 of 917 traded issues rose, with LG Energy Solution and Hyundai Motor also down 4.6% and 5.7% respectively.
Foreign investors were the main sellers, offloading a net 3.62 trillion won (about US$2.68 billion) of Kospi shares. Institutions and retail investors stepped in to buy the dip, purchasing a net 1.69 trillion won and 1.29 trillion won respectively. The won also came under pressure, weakening past 1,350 per dollar at one point before recovering to around 1,343 by the 3:30 p.m. close, the Herald said.
US inflation and AI funding worries
The trigger came from Wall Street. US consumer prices rose 0.6% month on month in September, the fastest pace since April, reviving fears that the Federal Reserve could raise interest rates further. The Philadelphia Semiconductor Index fell 4.3% overnight, Reuters reported, as investors also questioned whether the heavy borrowing behind the global AI build-out can continue.
Mirae Asset Securities analyst Seo Sang-young told Reuters the market was reacting to “whether capital raising will be sustainable” in the AI sector. The slump was regional: Japan’s Nikkei 225 also fell 4.9% on the same day as chip-related stocks across Asia were sold.
What comes next
Korea’s financial authorities held an emergency meeting to review conditions and pledged a proactive response to protect market stability and investors, according to Reuters. Analysts, however, expect little immediate relief. Mirae Asset’s Kim Seok-hwan told the Herald that “volatility is expected to persist in the near term,” adding that weak domestic supply and demand leaves the market more exposed to external shocks.
Investors will be watching whether foreign selling eases when trading resumes on Friday, as well as for further signals from the Fed on the US rate outlook and any fresh evidence on the strength of AI-related chip demand.
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