A sidecar — a temporary halt on program sell orders — was triggered on the Kospi on Wednesday as the index plunged 5 to 6 percent in early trading. [Yonhap]
A sidecar — a temporary halt on program sell orders — was triggered on the Kospi on Wednesday as the index plunged 5 to 6 percent in early trading. [Yonhap]

The Kospi tumbled more than 6 percent in early trading Wednesday, pressured by rising global oil prices, a sharp spike in long-term US Treasury yields and weakness on Wall Street overnight.

The benchmark index had briefly reclaimed the 7,000 level on Tuesday before closing lower, and it extended those losses sharply at Wednesday's open. Samsung Electronics and SK hynix — the top two stocks by market capitalization — were down 7 percent and 9 percent, respectively, in early trading.

The steep decline triggered a sell-side sidecar at the open, the 48th time this year the circuit breaker mechanism has been activated on the Kospi, prompting analysts to describe the market's volatility as having reached an extreme.

According to Korea Exchange, the Kospi stood at 6,413.43 as of 9:27 a.m. Wednesday, down 6.64 percent from the previous session.

The index opened down 4.96 percent at 6,528.77 and continued to widen its losses. Samsung Electronics and SK hynix, the two largest stocks by market cap, weighed heavily on the index with steep declines.

Samsung Electronics was trading down 7.64 percent at 248,000 won ($175), while SK hynix fell 9.45 percent to 1.505 million won.

Most large-cap stocks were in the red. Samsung Electronics preferred shares fell 7.65 percent, SK Square dropped 12.25 percent, Samsung Electro-Mechanics declined 5.49 percent, Hyundai Motor fell 6.32 percent and LG Energy Solution lost 1.99 percent.

In the Kospi market, retail investors were net buyers of 1.2 trillion won worth of shares, while foreign and institutional investors were net sellers of 1.02 trillion won and 209.8 billion won, respectively.

The Kospi had closed Tuesday down 1.55 percent at 6,869.83, snapping a six-session winning streak, and selling accelerated Wednesday morning. A sell-side sidecar halting program sell orders was triggered at 9:06 a.m.

Wednesday's activation was the 48th sidecar of the year on the Kospi — 25 on the sell side and 23 on the buy side. The KOSPI 200 futures contract that triggered the mechanism fell 6.02 percent to 1,013.26 from the previous session's base price of 1,078.26.

Analysts attributed the early plunge largely to overnight losses on Wall Street, which were driven by heightened Middle East tensions.

Geopolitical uncertainty resurfaced after both the United States and Iran refused to extend a ceasefire MOU once the 60-day negotiating window it established expired.

Overnight, US President Donald Trump wrote on Truth Social that there were "no ongoing consultations or talks with Iran, and none are scheduled," adding that the maritime blockade on Iran remained fully in place. Tensions rose further after a vessel was struck in the Strait of Hormuz.

The developments pushed international oil prices higher and lifted US Treasury yields, dampening investor sentiment.

Brent crude futures for October delivery and West Texas Intermediate futures for September delivery settled up 0.17 percent and 0.52 percent, respectively, at $91.02 and $84.95 per barrel.

The yield on the 30-year US Treasury bond climbed as high as 5.33 percent during trading, its highest level since 2007, while the 10-year yield hovered around 4.71 percent, near its highest since January 2005.

On Tuesday, the Dow Jones Industrial Average fell 0.22 percent and the S&P 500 dropped 0.69 percent, while the Nasdaq Composite declined 1.33 percent.

Major technology stocks also weakened. Nvidia fell 2.34 percent and Micron Technology dropped 7.02 percent, sending the Philadelphia Semiconductor Index down 4.98 percent. SK hynix's American depositary receipts tumbled 9.20 percent.

The Kosdaq was down 2.72 percent at 811.63 at the same time. In that market, foreign investors were net buyers of 81 billion won, while retail and institutional investors were net sellers of 34 billion won and 44.3 billion won, respectively.

Han Ji-young, a researcher at Kiwoom Securities, said the domestic market was set to open lower Wednesday due to rising long-term yields in major economies and weakness in US semiconductor stocks. "However, the adjustment pressure from rising rates was already partly absorbed through Tuesday's sharp drop, so the market may recover some of its losses during the session," Han said.


jiyun@heraldcorp.com