KOSPI falls as high US Treasury yields overshadow AI optimism

KOSPI and Kosdaq indexes are displayed in the dealing room of Hana Bank in Seoul, Tuesday. The benchmark KOSPI closed at 6,869.83, down 1.55 percent from the previous session, while the secondary Kosdaq closed at 834.20, down 3.52 percent. Yonhap

The KOSPI ended lower Tuesday, as heavy institutional selling and renewed concerns over high U.S. Treasury yields erased a chip-driven rally.

According to the Korea Exchange, the benchmark KOSPI closed at 6,869.83, down 1.55 percent from the previous session. The index opened 2.15 percent higher and briefly surpassed the 7,200 mark on optimism over artificial intelligence (AI) and semiconductor stocks, but gave up all of its gains and fell below 7,000 amid heavy institutional selling.

Foreign and retail investors net purchased 86.5 billion won ($61.21 million) and 731 billion won, respectively. Institutional investors dumped 785.4 billion won.

SK hynix rose 1.03 percent to close at 1,662,000 won, while Samsung Electronics lost 2.19 percent to finish at 268,500 won.

U.S. stocks closed lower overnight, with all three major indexes falling amid heightened geopolitical tensions between Iran and the U.S. and a surge in the benchmark 10-year U.S. Treasury yield to 4.726 percent.

While the Dow Jones and Nasdaq indexes declined, the Philadelphia Semiconductor Index gained 1.6 percent after Anthropic reported a sharp increase in second-quarter revenue, helping lift Korean chip stocks in early trading — but the gains were short-lived.

"We remain positive on the stock market outlook for the second half, but we believe the cycle is gradually entering its later stages," said Lee Eun-taek, chief strategist at KB Securities.

Lee identified a rise in the 10-year U.S. Treasury yield to between 5 percent and 5.3 percent as a potential warning sign for the AI investment cycle. While Big Tech companies are likely to continue investing to avoid falling behind in the AI race, higher interest rates could prompt financial institutions that provide funding to scale back financing, he said.

A deterioration in retail investor sentiment is another key risk to watch. According to the Korea Exchange, the average daily trading value on the KOSPI stood at 25.74 trillion won so far this month, the lowest monthly level in 2026. Average daily trading volume also fell to 321 million shares, marking the lowest level of the year.

The Kosdaq fell 3.52 percent to close at 834.20. The secondary index also opened 0.22 percent higher but later reversed course.

The won-dollar exchange rate closed at 1411.80 won per dollar, down 1.20 won from the previous session.