Lee Hyo-jin covers the Bank of Korea, the banking industry and broader financial news. Her previous beats include foreign affairs, North Korea and general reporting on Korean society.
'Black Tuesday': Seoul stocks crash over 10% as chip rout deepens
The closing figures for the benchmark KOSPI index, shares of Samsung Electronics and SK hynix are displayed on a screen in a Hana Bank dealing room in Seoul, Tuesday. KOSPI closed at 6023.63, down 10.84 percent from the previous session. Korea Times photo by Yoon Ki-hoon
By Lee Hyo-jin
Korea's benchmark KOSPI plunged more than 10 percent Tuesday as a global semiconductor sell-off and concerns over intensifying competition from China's ChangXin Memory Technologies (CXMT) hammered chip stocks.
KOSPI closed at 6023.63, down 10.84 percent from the previous session. It opened at 6400.27, or 5.26 percent lower, and extended losses throughout the session, briefly falling below the 6,000-point mark in afternoon trading.
Heavy selling triggered a sell-side sidecar on the main bourse at 9:06 a.m., according to the Korea Exchange, marking the 22nd such sidecar this year. As losses deepened, a circuit breaker was activated at 10:14 a.m., halting trading for KOSPI-listed shares for 20 minutes.
Foreign investors led the sell-off, offloading a net 4.98 trillion won ($3.41 billion) worth of shares. Retail investors were net buyers of 4.32 trillion won, while institutional investors purchased a net 638.7 billion won, but their buying was insufficient to offset the heavy foreign selling.
Chipmakers bore the brunt of the sell-off. SK hynix plunged 14.65 percent to 1.55 million won, while Samsung Electronics fell 13.39 percent to 222,000 won.
The declines followed a sharp overnight sell-off on Wall Street. The Philadelphia Semiconductor Index, a key gauge of U.S. chipmakers, fell 2.23 percent, extending its recent losses.
Analysts said investor sentiment deteriorated further after CXMT's blockbuster Shanghai debut the previous day fueled concerns over intensifying competition in the memory chip market.
The market was already under pressure from stretched semiconductor valuations and geopolitical tensions in the Middle East.
"Risk aversion has resurfaced as investors refocus on concerns over the AI investment cycle and China's growing competitiveness in the memory and other semiconductor industries," said Kang Jin-hyuk, an analyst at Shinhan Securities.
In a bid to curb wild swings in chip stocks, financial authorities said they were considering additional measures to curb demand for single-stock leveraged exchange-traded funds (ETFs) linked to Samsung Electronics and SK hynix, which have been blamed for exacerbating market volatility.
"We will review and prepare additional measures in advance if demand does not subside sufficiently," Financial Services Commission Chairman Lee Eog-weon said at a meeting with heads of brokerage firms and asset managers.
Lee floated the idea of capping investment in such ETFs at 20 percent of an individual's financial investment portfolio. The remarks came ahead of a new rule taking effect Friday that will raise the minimum cash deposit required to invest in the products to 30 million won.
Meanwhile, the tech-heavy Kosdaq fell 7.72 percent to close at 705.85. A sell-side sidecar was triggered at 9:14 a.m., followed by a circuit breaker at around 12:01 p.m. as the index extended its losses.
In the Seoul foreign exchange market, the won strengthened 6 won against the U.S. dollar to close at 1,462.5 per dollar.