KOSPI plunges 8% to trigger circuit breaker as chip rout deepens

The KOSPI plunged 8% to 6,880.97 on Monday, triggering a 20-minute trading halt as semiconductor heavyweights collapsed and geopolitical tensions escalated.

"Today's near-record fall in SK Hynix in Asian trading is no longer just South Korea's problem — it's now importing this volatility into the Nasdaq," said Nic Puckrin, cross-asset analyst and founder of Coin Bureau. "The two markets are becoming more intertwined than ever before, feeding off each other's tech concentration."

Samsung Electronics sank 9.2% to 258,750 won, while SK Hynix cratered 13.4% to 1,889,000 won, breaching the 2 million won threshold for the first time in months. Samsung Electro-Mechanics tumbled 18%, and SK Square lost 15.2%. Foreign and institutional investors dumped a combined net 2.8 trillion won ($1.9 billion), while retail buyers absorbed 2.7 trillion won ($1.8 billion) without stemming the decline. The won weakened past 1,500 per dollar to 1,507.60, its weakest level in months.

The selloff marks the seventh circuit breaker this year and the 13th in South Korean market history. With the KOSPI now 15% below its recent highs and the PHLX Semiconductor Index off 15% from its peak, the question is whether the AI-driven chip rally has entered a correction that could spill into U.S. markets ahead of ASML and TSMC earnings this week.

Three catalysts converged to drive the rout

The most direct trigger was a supply-demand imbalance after SK Hynix's $26.5 billion Nasdaq ADR listing on July 10. The ADRs closed 13% above the offer price on their debut, but the premium over the underlying Seoul-listed shares fueled a "buy ADR, short local stock" arbitrage trade that unwound sharply Monday. SK Hynix's U.S.-listed shares fell 9% in their first full trading day.

Compounding the pressure, Korea Investment & Securities cut its second-quarter operating profit estimate for SK Hynix to 60.4 trillion won, 8% below the consensus of about 65 trillion won. "SK Hynix's higher share of HBM revenue relative to competitors means its average selling price growth is lower than the market average," said Chae Min-sook, an analyst at the firm. Kim Seok-hwan, an analyst at Mirae Asset Securities, described the decline as "a volatility adjustment" reflecting the fading of the ADR listing event and the unwinding of leveraged positions, rather than a deterioration in semiconductor industry fundamentals.

Geopolitical risks added a third layer of pressure. Over the weekend, U.S. President Donald Trump formally ended the ceasefire with Iran, prompting Iran to blockade the Strait of Hormuz. The U.S. Central Command launched additional airstrikes, sending West Texas Intermediate crude into the $74 range and pushing the 10-year U.S. Treasury yield to about 4.58%. The won-dollar exchange rate rose 5.6 won to 1,507.60, holding above the psychologically important 1,500 level.

Some pockets of resilience emerged

The Kosdaq index fell 4.4% to 800.66, with foreigners selling a net 351.5 billion won ($233.3 million). But semiconductor materials and equipment stocks bucked the trend: Wonik IPS gained 8.5%, PSK rose 4.7%, and Leeno Industrial added 3.9%, suggesting some rotation from large-cap chip names into supply-chain plays. On the KOSPI, LG Energy Solution rose 1.2% and KB Financial Group added 0.7%.

The Korea Exchange said additional circuit breaker levels stand ready: a Level 2 halt at a 15% decline from the previous close, and a Level 3 halt ending trading for the day at a 20% decline. SK Hynix's Korean shares have now fallen more than 35% from their record high last month, while the stock's single-stock leveraged ETFs all sank to record lows during Monday's session.

This article is for informational purposes only and does not constitute investment advice.