Employees work at the dealing room of Hana Bank's headquarters in Seoul on Tuesday. The Kospi closed down 732.09 points, or 10.84 percent, at 6,023.66, while the Kosdaq fell 59.01 points, or 7.72 percent, to 705.85. [Yonhap]
Employees work at the dealing room of Hana Bank's headquarters in Seoul on Tuesday. The Kospi closed down 732.09 points, or 10.84 percent, at 6,023.66, while the Kosdaq fell 59.01 points, or 7.72 percent, to 705.85. [Yonhap]

South Korean stocks tumbled Tuesday as concerns over China's expanding semiconductor supply collided with growing doubts about the AI investment cycle. Panic selling by foreign investors — concentrated in semiconductor shares — drove the Kospi below the 6,000 mark intraday before it clawed back above that level to close, while the Kosdaq shed nearly 8 percent.

Korea Exchange data showed the Kospi closed down 732.09 points, or 10.84 percent, at 6,023.66. At its session low, the index slid to 5,992.91 — breaching the 6,000 level for the first time in roughly three months since April 14. The benchmark had surged through 4,000 last October, then cleared 5,000 in January, 6,000 in February, and both 7,000 and 8,000 in May. It peaked on June 18, when it broke above 9,000 intraday for the first time in history. The "9,000 era" proved short-lived: China's semiconductor shock and AI investment-cycle concerns erased those gains in just over a month, with the index shedding more than 3,000 points from its peak to the low 6,000s in little more than 30 days.

Selling pressure intensified from the opening bell, triggering a series of market stabilization mechanisms. At around 9:06 a.m., a sell-side sidecar was activated on the Kospi market after KOSPI 200 futures prices fell more than 5 percent below their reference price for one consecutive minute.

Then, at 10:13:43 a.m., the Kospi's 8.02 percent decline to 6,213.51 triggered a Level 1 circuit breaker, halting all trading on the Kospi market for 20 minutes.

Foreign investors drove the selloff. Foreigners posted net selling of 4.97 trillion won ($3.39 billion) on the Kospi market, dragging the index lower. Retail investors absorbed 4.33 trillion won in net purchases and institutions bought a net 630 billion won, but neither was enough to stem the decline.

Every sector closed in the red. Electrical and electronics led the losses at minus 13.60 percent, followed by medical and precision equipment (minus 10.95 percent), construction (minus 9.38 percent), machinery and equipment (minus 9.28 percent), telecommunications (minus 8.58 percent), financials (minus 8.11 percent) and retail (minus 7.34 percent).

Large-cap stocks were hit hard across the board. Samsung Electronics fell 13.39 percent to close at 210,000 won, while SK Hynix dropped 14.65 percent to 1.55 million won. Samsung Electronics preferred shares (minus 12.01 percent), SK Square (minus 15.60 percent), Samsung Electro-Mechanics (minus 15.92 percent), Hyundai Motor (minus 9.68 percent) and LG Energy Solution (minus 5.17 percent) also posted steep losses.

The Kosdaq closed down 59.01 points, or 7.72 percent, at 705.85. The index fell as low as 697.45 intraday, briefly surrendering the 700 level. A sell-side sidecar was triggered on the Kosdaq market at 9:14 a.m., and a Level 1 circuit breaker halted trading for 20 minutes starting at 12:01 p.m.

On the Kosdaq, retail investors and foreigners were net buyers of 51.5 billion won and 85.9 billion won, respectively, while institutions were net sellers of 134.5 billion won.

Among top Kosdaq-listed stocks by market capitalization, Alteogen fell 4.97 percent, Ecopro BM dropped 7.87 percent, Ecopro lost 9.80 percent, Rainbow Robotics declined 10.20 percent, Jusung Engineering tumbled 14.08 percent, Leeno Industrial fell 11.75 percent, Wonik IPS slid 15.57 percent and HLB shed 3.34 percent. PharmaResearch bucked the trend, closing up 1.49 percent.

Market analysts said risk aversion spread from semiconductors to the broader market as fears over China's expanding memory chip supply compounded a loss of confidence in the AI investment cycle.

"News that a Chinese company has begun producing immersion deep ultraviolet lithography equipment has raised concerns that the production bottleneck constraining Chinese memory chipmakers could ease," said Lee Gyeong-min, an analyst at Daishin Securities. "Even if Chinese firms cannot close the technology gap in the short term, there is growing wariness that an increase in Chinese memory supply could destabilize a market structure that has so far favored suppliers."

Lee added that reports of Nvidia providing $250 billion in financial guarantees related to OpenAI's data center investment had also shaken confidence in the AI investment cycle. He said concerns were mounting that the scale of AI investment was based on expectations far exceeding actual demand, and that risk aversion had spread beyond semiconductors to every sector.


hajun825@heraldcorp.com