As of 11:00 a.m., the benchmark KOSPI had plunged 4.29 percent to 7,697.18. The junior KOSDAQ edged down 0.41 percent to 843.60.
Samsung Electronics estimated second-quarter operating profit at 89.4 trillion won, a figure that could approach 10 trillion won excluding one-off bonus payments to employees. The astronomical result nevertheless stoked concerns that the AI-driven boom may be nearing its peak.
The market bellwether fell 6.45 percent to 297,500 won in morning trading. No. 2 chipmaker SK hynix also lost nearly 6 percent to 2,209,000 won as investors pulled money from Seoul ahead of its $29 billion American depositary receipt (ADR) listing on the Nasdaq.
The stock nevertheless remained a favorite among retail investors. On Monday, the KODEX SK hynix Single Stock Leverage ETF attracted 111.2 billion won in net purchases from individuals, the largest daily inflow among domestic ETFs, as they bet the stock still had room to rise after gaining U.S. market exposure.
Defense shares also weighed heavily on the benchmark after Canada selected Germany's Thyssenkrupp Marine Systems (TKMS) over the Hanwha Ocean-led Korean consortium as the preferred bidder for its next-generation submarine program.
Hanwha Ocean tumbled 22.57 percent to 89,900 won after the setback, while fellow bidder HD Hyundai Heavy Industries fell 3.95 percent.
Most other blue-chip stocks also retreated, with SK Square falling 9.83 percent to 1,348,000 won, Samsung Electro-Mechanics down 8.59 percent to 167,100 won, Samsung Life Insurance losing 8.13 percent to 361,500 won, LG Energy Solution declining 6.77 percent to 330,500 won, Hyundai Motor dropping 6.57 percent to 469,000 won and Samsung C&T slipping 5.78 percent to 423,500 won.
Meanwhile, brokerage firms said biotechnology shares could be re-rated as the government prepares to introduce a new classification system for the KOSDAQ market.
Hana Securities said the system could help restore confidence among foreign and institutional investors, while premium stock classifications, technology transfer announcements and major medical conferences are expected to improve sentiment from the fourth quarter.
The optimism was reflected in Tuesday's trading, with biotechnology shares outperforming the broader market. Alteogen rose 1.81 percent to 337,000 won, HLB gained 2.51 percent to 49,975 won and Abelbio jumped 4.77 percent to 94,500 won, helping support the KOSDAQ despite broader market weakness.
Overnight, Wall Street closed higher as easing oil prices and optimism over the U.S. earnings season offset weakness in semiconductor shares. The S&P 500 rose 0.72 percent and the Nasdaq gained 1.12 percent, though the gains did little to lift sentiment in Seoul.
Japan's Nikkei 225 fell 1.35 percent, mirroring the retreat in Seoul's chip sector. China's Shanghai Composite slipped 0.45 percent. Hong Kong's Hang Seng, however, bucked the regional trend, rising 0.31 percent.
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