-Circuit breaker triggered 3 minutes after open; Kosdaq sell-side sidecar also activated

-Foreign selling intensifies on US semiconductor shock, rate-hike fears

-Samsung Electronics, SK Hynix breach key price levels during trading

Dealers work at the trading room of Hana Bank's headquarters in Seoul on Monday, when a circuit breaker was triggered on the Kospi amid a sharp market selloff. The Kospi opened down 112.50 points, or 1.38 percent, at 8,048.09 that day. [Yonhap]
Dealers work at the trading room of Hana Bank's headquarters in Seoul on Monday, when a circuit breaker was triggered on the Kospi amid a sharp market selloff. The Kospi opened down 112.50 points, or 1.38 percent, at 8,048.09 that day. [Yonhap]

South Korean stocks tumbled Monday under the weight of a plunging US semiconductor sector and a surging won-dollar exchange rate. The Kospi fell below the 8,000 mark and slid as low as the 7,400 level intraday, while the won-dollar rate broke through 1,555 won — its highest opening level since the global financial crisis. A circuit breaker was triggered on the main bourse just three minutes after the open, and a sell-side sidecar was activated on the Kosdaq, as panic selling swept across the market.

As of 10 a.m., the Kospi was trading at 7,678.09, down 482.50 points, or 5.91 percent, from the previous session, according to Korea Exchange. The index surrendered the 8,000 level immediately after the open before extending losses to the 7,400 range during the session.

Korea Exchange activated a circuit breaker on the main bourse at 9:03:42 a.m. as the selloff deepened.

Most large-cap stocks fell sharply. Samsung Electronics was trading at 306,000 won, down 23,000 won, or 6.99 percent, from the previous session, after briefly breaking below the 300,000-won mark in early trading. SK Hynix fell 77,000 won, or 3.72 percent, to 1,993,000 won, slipping below the 2,000,000-won level during the session.

Other major stocks also declined across the board: SK Square dropped 6.20 percent, Hyundai Motor 8.00 percent, Samsung Electro-Mechanics 2.39 percent, LG Energy Solution 4.95 percent, Samsung Life 8.85 percent, Samsung C&T 9.23 percent and HD Hyundai Heavy 4.07 percent.

The Kosdaq also extended its decline. At the same time, the Kosdaq index was at 945.09, down 57.35 points, or 5.72 percent, from the previous session. A sell-side sidecar was activated on the Kosdaq at around 9:06 a.m.

The selloff was driven largely by fears of tighter US monetary policy. The US Department of Labor reported that nonfarm payrolls rose by 172,000 in May, well above market expectations. The stronger-than-expected jobs data fueled concerns that the Federal Reserve could raise interest rates before year-end, pushing US Treasury yields higher and intensifying risk-off sentiment among investors.

Semiconductor stocks bore the brunt of the selling. On June 6 local time, Nvidia fell 6.20 percent and Micron dropped 13.25 percent on the New York Stock Exchange, while the Philadelphia Semiconductor Index plunged 10.26 percent. As expectations for the semiconductor industry cycle and AI investment faded, selling pressure concentrated on domestic semiconductor stocks as well.

"The psychological burden from the chain reaction of sharp declines in domestic and overseas semiconductor stocks last Friday cannot be overlooked," said Han Ji-young, a researcher at Kiwoom Securities. "The key question is whether macro data, earnings results and supply-demand events during the week can provide a turning point to restore the chilled investor sentiment."

The won-dollar exchange rate added to the market's woes. The rate opened at 1,555.2 won per dollar in the Seoul foreign exchange market Monday, up 16.1 won from the previous session. That was the highest opening rate in roughly 17 years, since March 6, 2009 — during the global financial crisis — when it stood at 1,590 won.

The won has surged since the outbreak of the Iran war in late February and has refused to retreat despite strong verbal intervention by currency authorities. The won-dollar rate has closed above 1,500 won for 14 consecutive trading sessions on a weekly closing basis — the second-longest such streak on record, trailing only the 49 consecutive sessions logged during the currency crisis of late 1997 to early 1998. The current run has already surpassed the nine consecutive sessions seen in March and April, just after the Iran war broke out, as well as the 11 sessions recorded during the global financial crisis in February and March 2009.

The monthly average exchange rate has also climbed steadily. After standing at 1,448.4 won in February, just before the Iran war, it jumped to 1,492.5 won in March, eased slightly to 1,485 won in April, then rose again to 1,491.3 won in May. The average rate for June, through June 5, reached 1,522.4 won.

Currency authorities believe the current exchange rate level is excessive given recent economic conditions, and argue that the current high-rate environment is fundamentally different from past crises. "During past financial crises, a country was in danger when foreign capital fled," said Moon Da-woon, a researcher at Korea Investment & Securities. "Now, residents are voluntarily sending money abroad to build up overseas assets — and the resulting surge in dollar demand is what is driving the sharp rise in the exchange rate."


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