KOSPI tumbles below 7,000 in 'Black Monday' sell-off

KOSPI and the share prices of SK hynix and Samsung Electronics are displayed in the trading room of Hana Bank in Seoul, Monday. The benchmark index closed at 6,806.93, down 8.95 percent from the previous session. SK hynix and Samsung Electronics fell 15.37 percent and 10.7 percent, respectively, to close at 1,845,000 won ($1,228.74) and 254,500 won. Newsis

KOSPI fell nearly 9 percent to below 7,000 Monday, as a rout in semiconductor shares overshadowed the blockbuster U.S. debut of SK hynix's American depositary receipts (ADRs).

SK hynix and Samsung Electronics, which together account for more than 60 percent of KOSPI's market capitalization, plunged 15.37 percent and 10.7 percent, respectively, dragging the index sharply lower.

KOSPI closed at 6,806.93, down 8.95 percent from the previous session, according to the Korea Exchange. The sell-off triggered the market's 35th sell-side program-trading curb and seventh circuit breaker of the year.

SK hynix ended at 1,845,000 won ($1,228.74), while Samsung Electronics closed at 254,500 won.

The sell-off dashed hopes that SK hynix's U.S. listing would help revive the Korean stock market, which has fallen about 27.5 percent from its record intraday high of 9,385.59 set on June 19.

SK hynix's ADRs, trading under the ticker SKHY, closed at $168 on Friday, up 12.8 percent from the $149 offering price. The listing surpassed Alibaba's to become the largest U.S. fundraising by a foreign company on record.

Analysts attributed the divergence between SK hynix's Seoul-listed shares and its ADRs partly to a "sell-the-news" reaction, as investors locked in gains after the long-awaited U.S. listing. Renewed geopolitical tensions between the U.S. and Iran over the weekend added to the risk-off mood.

"Profit-taking pressure emerged as the listing catalyst faded," said Kim Seok-hwan, a senior analyst at Mirae Asset Securities.

At the same time, broader concerns about the outlook for the semiconductor industry are still weighing on sentiment. Despite the strong reception for SK hynix's ADRs in the U.S., investors remain worried that the memory chip cycle may be approaching a peak.

"The recent string of sharp declines in semiconductor shares appears to have made investors increasingly sensitive to news or analyst reports that could be interpreted negatively," said Han Ji-young, an analyst at Kiwoom Securities. "The unprecedented volatility in chip stocks is also fueling investor fatigue and prompting capital to flow out of the sector."

In a report released shortly before the listing, UBS recommended going long on SK hynix's ADRs while shorting the company's Seoul-listed shares. The stock faced further pressure after Korea Investment & Securities said Monday that SK hynix's second-quarter earnings could fall short of market expectations.

Technical factors may also continue to weigh on the stock, as forced margin sales jumped to 142 billion won on July 9 from 29 billion won a day earlier. The pressure could persist because forced liquidations typically occur with a lag after margin shortfalls.

Still, Kim said it would be premature to interpret the share price correction as evidence of a downturn in the semiconductor industry, pointing to resilient export data.

Korea's exports rose 53.9 percent from a year earlier to a record-high $29.8 billion in the first 10 days of July. Semiconductor shipments surged 193 percent to $11.2 billion, accounting for 37.6 percent of total exports.

"While some of the increase reflects higher memory chip prices, there is still limited evidence that the current share price decline signals a sharp contraction in semiconductor demand," Kim said.

The secondary Kosdaq closed at 799.36, down by 4.55 percent from the previous session. The Korean currency weakened to 1,503.4 won per dollar, up 2 won.