Fresh concerns over artificial intelligence (AI)-related infrastructure spending, sparked by a cautious report from U.S. investment bank Morgan Stanley, added to the pressure on technology stocks. Investor sentiment weakened further after the Bank of Korea raised its benchmark interest rate by 25 basis points to 2.75 percent on Thursday, adding to the headwinds for equities.
The benchmark KOSPI fell 4.91 percent to 6,926.65 in early trading, falling back below the 7,000 mark a day after soaring over 6 percent. The Korea Exchange activated the temporary curb on program sell orders at around 9:10 a.m. as the decline accelerated.
The junior KOSDAQ also dropped 2.45 percent to 809.08, suggesting the extreme volatility gripping Seoul's stock market.
The retreat followed a mixed session on Wall Street. Although last month's index for producer prices fell 0.3 percent from the previous month and annual producer inflation eased to 5.5 percent from 6 percent, reducing expectations of further Federal Reserve tightening, investors rotated out of semiconductor shares.
Sentiment was further dented by a report from Morgan Stanley, which warned that rising electricity costs and tighter environmental regulations were leading to delays and cancellations of data-center projects, reviving concerns that the AI infrastructure investment boom could be losing momentum.
The renewed worries weighed heavily on chip stocks. The Philadelphia Semiconductor Index fell 2.08 percent, and Micron Technology plunged 7.94 percent. Marvell Technology, Intel and AMD lost 7.27 percent, 4.43 percent and 3.46 percent, respectively. SK hynix ADR tumbled 9.00 percent as concerns emerged over potential delays in data-center construction, adding pressure to Korean chipmakers.
The weakness quickly spilled over to Seoul's technology sector. Samsung Electronics and SK hynix came under renewed selling pressure as investors unwound positions following the previous session's sharp rally, with profit-taking spreading across semiconductor-related stocks.
Samsung Electronics fell 5.72 percent to 263,500 won, while SK hynix slid 8.36 percent to 1,908,000 won. Samsung Electro-Mechanics dropped 7.86 percent, SK Square lost 9.41 percent and Samsung Electronics preferred shares declined 4.84 percent as selling spread across chip-related and Samsung affiliates.
But not all sectors joined the selloff. Battery makers outperformed, with LG Energy Solution rising 2.84 percent, while financials also attracted buying as KB Financial gained 2.26 percent. Samsung Biologics edged up 0.43 percent among large-cap defensives.
Auto-related stoks were mixed, with Hyundai Motor falling 2.19 percent while affiliate Kia was little changed, up 0.14 percent. Shipbuilders remained resilient as HD Hyundai Heavy Industries advanced 1.91 percent and Hanwha Aerospace gained 0.86 percent. Shinhan Financial also climbed 2.98 percent.
KOSDAQ's heavyweights also retreated, with Alteogen slipping 1.73 percent to 283,500 won, EcoPro BM falling 2.15 percent to 118,300 won and EcoPro losing 3.12 percent to 83,700 won. Jusung Engineering dropped 7.30 percent, Rainbow Robotics declined 5.23 percent, Wonik IPS fell 8.48 percent, PSK lost 6.60 percent and Reno Industrial shed 5.01 percent soon after the open.
The declines were partially offset by gains in select biotech names, with HLB rising 2.88 percent to 35,700 won and Kolon TissueGene advancing 2.70 percent to 80,000 won.
Investors are also awaiting the government's review of single-stock leveraged exchange-traded funds tied to Samsung Electronics and SK hynix. Officials are expected to discuss possible measures later in the day after President Lee Jae Myung called for a swift review, amid concerns that the products have amplified volatility in the Korean stock market.
Attention is also shifting to TSMC's second-quarter earnings later in the day, which may set the tone for semiconductor stocks.
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