Kospi Hits Circuit Breaker as Chip Stocks Trigger $2.6 Billion Selloff

Mumbai | June 23 

South Korea’s benchmark Kospi index hit an 8% circuit breaker level on Tuesday, around 12:00 pm IST, as heavy selling in chip-making stocks wiped out recent gains within minutes. Japanese benchmark indices fell 3% in sympathy. 

The Kospi had touched a fresh record high of 9,389 on Friday amid optimism around chip stocks. Concerns had been building, however, as leveraged positions in Samsung Electronics and SK Hynix increased sharply ahead of Tuesday’s reversal. 

What Triggered the Selloff 

Samsung Electronics and SK Hynix shares led the fall, with Samsung plunging 10.8% and SK Hynix down 11.4%, the steeper of the two. The two companies dominate South Korea’s semiconductor sector and together account for more than half of the Kospi’s total market capitalisation, which explains how their fall translated into an 8% drop for the index. 

The decline reflected a combination of profit-taking, stretched valuations and growing doubt over whether the AI-driven rally can be sustained. Sentiment weakened further after a pullback in US technology stocks, raising concerns that richly valued AI-linked companies could face a broader correction. Elevated retail leverage, derivatives positioning and liquidity conditions amplified the scale of the move. 

Foreign investors led the exodus, selling more than ₩4 trillion ($2.6 billion) worth of Kospi shares, while domestic retail investors stepped in to buy the dip. 

SK Hynix, a leading supplier of high-bandwidth memory chips used in advanced AI systems, had risen sharply in the sessions before Tuesday’s reversal. Its gains for the year had approached 350%, significantly outpacing Samsung’s advance and becoming a symbol of the market’s AI-driven exuberance. 

Micron Earnings Become the Next Test 

Investors are now focusing on Micron Technology’s quarterly results, due later this week, for clues on demand for memory chips and AI infrastructure. A strong report could revive confidence in the semiconductor sector, while signs of slowing demand may fuel further selling across Asian technology stocks. 

Volatility Concerns Mount 

The plunge exposes growing volatility in South Korea’s stock market after months of extraordinary gains. Leveraged ETFs linked to Samsung and SK Hynix have amplified both gains and losses, drawing scrutiny from regulators. 

South Korea’s Financial Supervisory Service Governor, Lee Chan-jin, said authorities are considering market-stabilisation measures to curb fallout from sharp swings in semiconductor-focused leveraged ETFs. 

Margin debt, funds borrowed by investors to buy stocks, climbed to a record ₩38.5 trillion this month, according to Korea Financial Investment Association data. The Kospi’s volatility gauge surged toward levels last seen in early June. 

Outlook 

The source material frames the decline as a correction within a broader AI-led bull market rather than a prolonged downturn, though elevated valuations, heavy retail participation and looming earnings catalysts suggest volatility will likely stay high in the weeks ahead. 

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