South Korean stocks nosedived more than 8% Monday, extending a three-day losing streak as investors sold heavily in semiconductor and AI-related shares, rattled by a combination of U.S. interest-rate fears, geopolitical tensions in the Middle East, and growing unease about whether the artificial intelligence boom can sustain its rally.
The benchmark Korea Composite Stock Price Index (KOSPI) fell 676.18 points, or 8.29%, to close at 7,484.41 after touching 7,442.73 during the session. Trading volume was heavy at 448.3 million shares worth 47.8 trillion won ($31.2 billion). Losers outnumbered winners 873 to 42. Foreign and institutional investors sold a combined 1.96 trillion won in local shares, while retail investors bought 1.76 trillion won.
The Korea Exchange activated a circuit breaker for the KOSPI roughly three minutes after the opening bell, halting trading for 20 minutes. It later imposed a consecutive sell-side sidecar for the main board and triggered a circuit breaker for the secondary KOSDAQ market after that index dropped more than 8%. The KOSDAQ finished the day down more than 9% at 911.39.
The Monday selloff was largely anticipated after a sharp decline on Wall Street the previous session. The Dow Jones Industrial Average closed 1.35% lower Friday, the S&P 500 fell 2.64%, and the tech-heavy Nasdaq composite slid 4.18%. Major U.S. chip shares led the rout: Nvidia slumped 6.2%, Broadcom fell 7.92%, and Micron dropped 13.25%.
The sell-off followed a stronger-than-expected U.S. jobs report for May that stoked fears the Fed might raise interest rates. The broader U-6 underemployment rate, which includes discouraged workers and those in part-time jobs for economic reasons, stood at 8.1% in May, according to Labor Department data processed by the Federal Reserve Bank of St. Louis.
“Samsung Securities said in a report that “today’s pullback appears to be driven not by the weakening of market fundamentals, but by profit-taking sentiment among investors, mainly targeted at the semiconductor sector, as the market reacted more sensitively to negative developments after an extended rally of chip shares.”
The KOSPI had been one of the world’s best-performing stock indexes in recent months, surging to near the 9,000-point mark last Tuesday from the 5,000-point level earlier this year, driven mainly by semiconductor heavyweights Samsung Electronics and SK hynix.
Samsung Electronics fell 10.18% to 295,500 won on Monday, while SK hynix dipped 7.68% to 1.91 million won. AI investment firm SK Square nosedived 11.13%. Other blue chips also saw steep losses: Samsung C&T fell 11.29%, Hyundai Motor dropped 8.71%, LG Energy Solution pulled back 6.16%, and LG Electronics slipped 11.55%.
Among the few gainers, Naver jumped 9.2% on news of a joint project with Nvidia to build a global AI factory, and on the nomination of former Naver CEO Han Seong-sook as South Korea’s new prime minister. SK Networks surged 30% after SK Group and Nvidia announced a broader AI infrastructure partnership.
The Korean won strengthened against the U.S. dollar after opening at 1,555.2 won, its lowest level since March 2009, before recovering to close at 1,535.0, up 4.1 won from the previous session. Financial authorities had vowed “stern action against excessive volatility and one-sided movements” in the foreign exchange market, according to a statement.
Bond prices closed lower. The yield on three-year Treasurys rose 5.8 basis points to 3.940%, and the five-year government bond yield added 7 basis points to 4.190%.
Analysts said the week ahead could bring further volatility. Seo Sang-young, an analyst at Mirae Asset Securities, said “there is a lot at stake in this week’s financial market, with U.S. inflation data, treasury yields and the ongoing debate over the sustainability of AI-related investment all unfolding simultaneously.” Han Ji-young, a researcher at Kiwoom Securities, warned of a “challenging” week, citing the upcoming release of the U.S. Consumer Price Index for May, the SpaceX listing, and Oracle’s earnings results.
Market analysts also noted that news of Iran and Israel exchanging strikes dampened risk appetite and dimmed hopes for peace in the Middle East.