Seoul stocks plunge for 2nd day amid growing panic sell-off

The KOSPI and Kosdaq indexes are displayed in the dealing room of Hana Bank in Seoul, Wednesday. The benchmark KOSPI closed at 5,663.24, down 5.98 percent from the previous session, while the secondary Kosdaq closed at 662.68, down 6.12 percent. Korea Times photo by Shim Hyun-chul

KOSPI tumbled below the 6,000-point mark after suffering steep losses for a second consecutive day, deepening concerns that the market sell-off has entered a self-reinforcing phase, analysts said Wednesday.

KOSPI closed at 5,663.24, down 5.98 percent from the previous session. The benchmark index opened at 6,089.11 and climbed as high as 6,228.52 during the session. Selling then intensified rapidly, with a sell-side sidecar issued at 9:06 a.m. and a circuit breaker activated at 12:32 p.m. The index plunged to the 5,200-level intraday before paring some of its losses.

Foreign and retail investors led the selling spree, dumping 764.4 billion won ($527.8 million) and 2.93 trillion won in shares, respectively. Institutional investors purchased 3.61 trillion won in shares, but the buying was not enough to halt the plunge.

SK hynix fell 9.61 percent to close at 1,401,000 won despite announcing record quarterly earnings, while Samsung Electronics plunged 5.23 percent to close at 208,500 won.

The secondary Kosdaq market was also hit hard, falling 6.12 percent to 662.68. A sell-side sidecar was triggered at 9:14 a.m., followed by a circuit breaker at 12:19 p.m. It was the first time that circuit breakers were activated on both KOSPI and Kosdaq for two consecutive sessions.

Such sharp declines are unusual in the absence of a major systemic risk, such as a financial crisis. KOSPI has fallen 39.7 percent from its all-time intraday high, reached on June 19. In July alone, the index has plunged more than 31.8 percent, surpassing the monthly decline recorded during the 1997 Asian financial crisis.

"Today's plunge does not appear to be a normal market move," said Han Ji-young, an analyst at Kiwoom Securities. "Similar market crashes in the past were typically accompanied by systemic shocks, such as financial crises, wars or the bursting of asset bubbles. So far, however, there are few clear signs that such a crisis is emerging."

As Korea has emerged as a global bellwether for sentiment toward artificial intelligence (AI), its stock market has tended to move in tandem with global technology shares. Wednesday's decline, however, was more severe than those seen in overseas markets.

The tech-heavy Philadelphia Semiconductor Index fell 4.49 percent overnight. The broader U.S. market was relatively stable, with the S&P 500 rising 0.21 percent and the Nasdaq Composite slipping just 0.22 percent.

Japan's Nikkei fell 2.81 percent Wednesday, while China's CSI 300 dropped 0.53 percent. Taiwan's TAIEX also fell 4.65 percent.

Analysts said KOSPI's recent plunge could not be explained solely by concerns over slowing AI demand or external factors. The market's heavy concentration in chip stocks, combined with trading distortions linked to single-stock leveraged exchange-traded funds, has created a vicious cycle in which falling prices trigger further selling.

Concerns about future industry outlook overshadowed the strong results. The lack of a concrete shareholder return plan during the SK hynix conference call added to investors' disappointment.

Middle East tensions also resurfaced after Iran said it had seized oil tankers in the Strait of Hormuz. As investors awaited the Federal Open Market Committee meeting's decision, set to be announced Thursday morning (local time), concerns that higher oil prices could renew inflationary pressure strengthened risk-off sentiment.

Along with chip stocks, power equipment stocks weakened as sentiment toward investment in AI infrastructure deteriorated. Defense shares remained under pressure amid continued profit-taking. Some consumer stocks, including Samyang Foods and Orion, bucked the broader decline.

Despite persistent liquidity pressures and leveraged trading, Nomura Securities said Korea's next re-rating would be driven by a recalibration of fundamentals. The investment bank maintained its KOSPI target range of 10,000 to 11,000.

"As market 'deleveraging' progresses and foreign selling pressure eases, the next leg of Korea’s re-rating is likely to be supported by corporate share buybacks and treasury-share cancellations, particularly among large-cap companies, in our view," said Cindy Park, head of Korea equity research at Nomura.

The won strengthened against the dollar, with the won-dollar exchange rate closing at 1,446.7 won, down 15.8 won from the previous session.