The South Korean stock market has once again collapsed, marking its sixth significant drop this month. Concerns over China's semiconductor industry and the weakness of U.S. tech stocks contributed to the KOSPI index falling by more than 10% during trading, while the KOSDAQ index also dropped over 8%.
According to the Korea Exchange, the KOSPI closed at 6,023.66, down 732.09 points (10.84%) from the previous trading day. This decline is the second largest this year, following a 12.06% drop on March 4. The index opened at 6,400.27, down 355.48 points (5.26%), and quickly widened its losses. Considering previous drops of 7.89% on July 2, 5.35% on July 8, 8.95% on July 13, 6.37% on July 16, and 5.72% on July 24, this month has seen six instances of declines exceeding 5%, indicating extreme market volatility. The KOSDAQ index, which fell more than 8% during the day, closed down 59.01 points (7.72%) at 705.85.
On this day, foreign selling pressure was evident in large-cap stocks, while individual investors stepped in to buy. Individuals net purchased 4.33 trillion won, helping to support the index, while institutions also showed a net buying trend of 629 billion won. In contrast, foreign investors net sold 4.99 trillion won, realizing profits.
As the market plunged, safety mechanisms were activated. Both the KOSPI and KOSDAQ markets triggered sell-side circuit breakers and a first-stage circuit breaker. This was the first time since June 8 that both markets experienced simultaneous circuit breaker activation.
The drop was primarily driven by concerns surrounding the semiconductor sector. Chinese memory chip maker Changxin Memory Technologies (CXMT) surged on its first day of trading on the Shanghai Stock Exchange, and news emerged that Chinese companies have begun developing their own deep ultraviolet (DUV) lithography equipment. This has heightened fears regarding the competitiveness of China's semiconductor industry. While the likelihood of a rapid reversal in the technology gap is low, the commercialization of Chinese DUV technology could enhance the self-sufficiency of semiconductor equipment and alleviate bottlenecks for memory manufacturers like CXMT, which has contributed to market anxiety.
Additionally, negative news from the U.S. compounded the situation. NVIDIA announced it would provide $250 billion in financial guarantees related to its investment in OpenAI data centers, raising concerns about a 'circular deal' within the AI ecosystem. Doubts emerged that the large-scale investment was based on overly optimistic demand forecasts rather than actual end-user needs, shaking confidence in the overall AI investment cycle.
The domestic semiconductor giants were hit hard. Samsung Electronics closed at 220,000 won, down 13.39%, marking its largest drop of the year. SK Hynix also fell over 14%, closing at 155,500 won. The simultaneous decline of the top two market capitalization stocks led the index's drop.
However, analysts suggest that the market may be overreacting to these concerns. Han Ji-young, a researcher at Kiwoom Securities, stated, "The stock market's immunity has weakened significantly during this chain of adjustments. There has not yet been a realistic slowdown in fundamentals such as earnings, and all technical indicators point to oversold conditions."
Ultimately, the market's focus is shifting to the upcoming earnings reports from major tech companies. Seo Sang-young, a researcher at Mirae Asset Securities, noted, "This decline is a result of the ongoing issues that have been discussed and highlighted in the market, combined with risk-averse sentiment ahead of the earnings announcements from large tech firms. Given that solid earnings are expected from companies like SK Hynix, Microsoft, Meta, and Amazon, the market is likely to seek justification for a rebound as it assesses these results."
* This article has been translated by AI.
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