KOSPI Sinks 3.73% as Foreign and Institutional Investors Dump 1.54 Trillion Won of Korean Shares

South Korea’s stock market suffered one of its sharpest one-day falls of the year on Tuesday, with the benchmark KOSPI sliding 3.73% to close at 5,552.74 as foreign and institutional investors pulled more than 1.5 trillion won from the market, the Seoul Economic Daily reported, citing Korea Exchange data. The index shed 215.27 points and at one stage slipped below the 5,500 mark, touching an intraday low of 5,493.24.

The sell-off erased gains from the previous two sessions. Institutions were the heaviest sellers on the main board, offloading a net 1.005 trillion won, while foreigners sold a net 530.3 billion won. Retail investors stepped in with net purchases of 898.9 billion won, but their buying failed to stem the decline.

Chip giants and exporters lead losses

Heavyweight chipmakers dragged the index lower. SK hynix fell 4.23% to 1.223 million won and Samsung Electronics dropped 2.98% to 211,500 won. Losses were steeper elsewhere among large caps: SK Square lost 5%, Hyundai Motor fell 4.91% and LG Energy Solution declined 4.17%. The secondary KOSDAQ index fell 3.33% to 781.97, slipping back below the 800 level a day after reclaiming it.

The slump came despite a rebound on Wall Street overnight, where the Philadelphia Semiconductor Index rose 1.61%, ending an eight-session losing streak, according to Invezz. Korean chip stocks have lagged the global sector recently, and Invezz noted that foreign investors had already withdrawn more than 11 trillion won from Korean equities the previous week.

AI doubts, bond yields and a stronger won

Analysts pointed to a mix of pressures. Lingering doubts over whether heavy spending on artificial intelligence infrastructure will pay off, and how debt-laden AI data centre operators will fund their expansion, continue to weigh on sentiment toward memory makers. Rising oil prices and higher government bond yields in major economies, linked by the Seoul Economic Daily to fiscal and political instability in France and tensions in the Middle East, added to the gloom, while a stronger won raised concerns over exporters’ earnings.

Lee Kyoung-min of Daishin Securities attributed part of the drop to profit-taking after Monday’s rebound, with defence, shipbuilding and nuclear power stocks that had rallied a day earlier falling harder than semiconductors. Invezz also highlighted a company-specific worry: South Korea’s financial regulator said on Monday that a possible US listing of SK hynix’s Solidigm unit could breach rules protecting minority shareholders.

Not all observers are bearish on the chip sector. In a separate report carried by the Seoul Economic Daily, Nomura kept its buy ratings on both Samsung Electronics and SK hynix, arguing that a memory chip shortage will persist through 2028 and that concerns about slowing AI investment are overstated in some respects.

What’s next for Institutional Investors?

Kiwoom Securities analyst Han Ji-young described the market as being in “oversold territory marked by panic selling” and advised investors to hold their positions and watch the third-quarter earnings season. She said a recovery would need catalysts, such as a sense that valuations have fallen far enough and clearer evidence on the earnings of market leaders. With major technology companies in the US and Korea due to report results in the coming weeks, those numbers are likely to set the tone for foreign flows into Seoul.