Kospi sinks 5.8% as US chip selloff, rising yields hit tech

South Korea's Kospi plunged 5.8% to 6,471.17 as a U.S. chip rout and surging Treasury yields triggered a sell-side circuit breaker.

"The index plunged as foreign investors turned to net selling and institutional supply continued to exit," said Lee Kyung-min, an analyst at Daishin Securities.

Institutions sold a net ₩3.49 trillion and foreigners ₩1.32 trillion, while retail bought ₩4.64 trillion in a defensive move that failed to stem the decline. Samsung Electronics fell 7.82% to ₩247,500 and SK Hynix dropped 9.75% to ₩1,500,000, with the two chipmakers drawing most of the foreign selling.

The selloff erased most of a six-session winning streak that had lifted the index more than 2% the prior day, leaving markets to watch the Federal Reserve's July meeting minutes and a $20 billion 20-year Treasury auction for signs the long-end yield climb persists.

The immediate trigger was the sharp sell-off in U.S. semiconductor stocks overnight. The Philadelphia Semiconductor Index fell 4.98%, its largest decline since late July, with Micron down 7.02%, SanDisk 9.01%, Intel 6.58% and Nvidia 2.34%. Rising long-term yields compounded the pressure: the U.S. 30-year Treasury yield climbed to 5.34%, its highest since 2007, while the 10-year yield hovered near 4.71%, the strongest since January 2005. As long-term yields rise, the present value of future earnings falls, concentrating selling pressure on AI and semiconductor names trading at elevated valuations.

The Kospi opened at 6,531.00, down 4.93%, and extended losses to an intraday low of 6,400.81 before a modest rebound into the close. The sell-side sidecar, triggered at 9:06 a.m., was the 48th activation on the Kospi this year. SK Square plunged 11.54% and Samsung Electro-Mechanics fell 3.68%, while Hyundai Motor dropped 4.83% and KB Financial Group slipped 1.25%. Defensive and order-driven names held up: LG Energy Solution rose 1.85%, Samsung Biologics 0.85%, Hanwha Aerospace 2.71% on a U.S. howitzer prototype selection, and Hyundai Engineering & Construction gained 5.81% on order backlog news.

Won Strengthens Below 1,400 as Equities Slide

Unlike the stock market, the Korean won strengthened. The won-dollar exchange rate closed at ₩1,397.7, down 14.1 won, the first time below 1,400 since Oct. 2 last year. The move was attributed to a flood of dollar-selling by exporters ahead of interim corporate tax payments and expectations the Federal Reserve will hold rates next month after U.S. consumer and producer price data came in below forecasts.

Asian Equities Broadly Weaker

The U.S.-driven shock spread across Asia. Japan's Nikkei 225 fell 2.78% to 65,582.00 and the Topix dropped 2.76%, with Kioxia plunging as much as 11%, TDK down 4.1% and Sony off 1.0%. Mainland China's Shanghai Composite fell about 2% and the CSI 300 declined 2.41%, while Hong Kong's Hang Seng rose 0.17%. Baidu plunged 12.5% on weak advertising revenue and Xiaomi gained 6.4% on EV and AI growth expectations. Australia's S&P/ASX 200 fell about 0.3%, Singapore's STI 0.3% and Indonesia's IDX 0.6%.

Brent crude held above $90 at $91.76 a barrel as tensions between Iran and the United States over the Strait of Hormuz persisted, adding to pressure on risk assets alongside the yield climb. In a Bank of America fund manager survey, 59% of respondents said they were shifting funds into value, cyclical and defensive stocks to hedge AI-related downside risk, more than double the July level.

HSBC Global Investment Research upgraded South Korean equities to overweight from neutral, saying the correction had largely unwound excessive leverage as retail margin-financed investing declined. The bank cautioned that continued gains could prompt active funds at their single-country allocation limits to sell, though it said domestic demand should keep the market supported. The Kospi's combined operating profit reached a record ₩388 trillion in the first half, up 254.15% from a year earlier, driven by Samsung Electronics and SK Hynix, though the improvement was far less pronounced excluding the two chipmakers.

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