South Korean KOSPI plunged more than 8% on June 23. The drop was so sharp that the exchange had to activate protective trading halt mechanisms twice. In Japan, Nikkei 225 also could not hold on and broke its eight-day winning streak.
The reason came from the US market. Investors began to sharply exit tech stocks, and this wave quickly reached Asia. Markets where chip manufacturers play a major role were especially vulnerable.
Since the beginning of the year, the indices of Taiwan, South Korea, and Japan have gained more than 40%. Growth was largely driven by interest in semiconductors and AI companies. When sentiment around American big tech soured, these markets took the hardest hit.
KOSPI Plunged After Market Open
Trading in South Korea started calmly. KOSPI opened at 9,083.54 points, just 0.34% below the previous close. But then selling quickly intensified.
The index broke through 9,000, 8,900, and 8,800 points, and then dropped to 8,500. At 11:40 local time, the Korea Exchange activated a sell limit mechanism. Later, around 14:40, the first stage of a full trading halt was triggered.
By this point, KOSPI had fallen to 8,375.31 points, losing 8.11% for the day. For the South Korean market, this was one of the sharpest declines in recent times.
Since the start of trading, the KOSPI index has been rapidly declining. Source: TradingView.
The sell-off started on Wall Street. Alphabet shares fell nearly 5% after news broke that two well-known AI specialists left for competitors.
SpaceX was also under pressure. The company’s shares lost 16% and were down for the third straight session. Investors were spooked by a large bond placement, which raised more questions about companies’ AI spending.
In Japan, Nikkei 225 also went down. The index broke its eight-day winning streak and at the time of publication was down nearly 3%.
Samsung and SK Hynix Led the Decline in Seoul
Tech giants suffered the most in South Korea. Foreign investors actively sold shares from the KOSPI, and the main pressure was on Samsung Electronics and SK Hynix.
Shares of Samsung Electronics fell by 8.77% to 322,500 won. This continued the weak trend from the previous session, when Samsung for the first time in 26 years ceded the top spot by market cap in the KOSPI to SK Hynix.
But SK Hynix also could not hold on. The memory maker’s shares plunged 11.55% to 2.582 million won. This happened even though shares of US-based Micron rose 6.82% the day before.
Analyst Kiwoom Securities Han Ji Young noted that two factors hit the market at once: the weakness of the US “Magnificent Seven” and the rise in US Treasury yields. For growth stocks, this is an especially painful combination.
Meanwhile, falling oil prices may slightly ease the situation. Negotiations to end the conflict between the US and Iran are weighing on oil prices, and cheaper oil reduces inflation risks and some pressure from rates.
