On the 8th, the KOSPI index plunged at the open, falling below the 8,000 level. After last week's U.S. "jobs surprise" and a sharp sell-off in tech stocks, investor sentiment in Korea's stock market also froze rapidly.
That day, the KOSPI index opened at 8,048.09, down 112.5 points (1.38%) from the previous trading day, but it plunged more than 8% right after the open and sank to 7,477.46. As most large-cap stocks by market capitalization tumbled right after the open, the volatility interruption mechanism (VI) was triggered and single-price trading was conducted for two minutes, but once the VI was lifted, the index resumed its plunge.
As the index plunged, level-1 circuit breakers, which temporarily halt stock trading, were triggered. All stock transactions in the KOSPI market were suspended for 20 minutes.
In the KOSPI market, net selling by foreign investors is continuing. Foreign investors have been net sellers of 230 billion won, while institutions and individuals are net buyers.
The day's stock plunge appears to reflect the impact of the U.S. market's sell-off over the weekend on concerns that the U.S. Federal Reserve (Fed) will raise interest rates.
Over the weekend, the U.S. Department of Labor released May employment data, which showed the U.S. job market is performing quite well. The month-over-month increase in May nonfarm payrolls came in at 172,000, more than double the market forecast of 85,000. The April figure was also revised up by 64,000 from the initial release, supporting assessments that the U.S. economy remains solid.
This strong employment picture fed worries about Fed tightening. According to CME FedWatch, the market lowered the odds of a rate cut within the year to the 1% range and began pricing in the possibility of one to two rate hikes within the year.
On expectations that the Fed could tighten more aggressively than anticipated, the U.S. 10-year Government Bonds yield climbed again and the dollar turned stronger. As the dollar strengthened, the won-dollar exchange rate also spiked. The won-dollar rate surged to about 1,560 won, the highest level since the global financial crisis.
In particular, as tech stocks plunged, the rally in Korea's market that had been led by large semiconductor stocks is facing a brake. Over the weekend, the Philadelphia Semiconductor Index tumbled 10.26%. Broadcom (-7.92%) fell on concerns about slowing profitability, and Micron Technology (-13.25%), which had soared more than 900% over the past year, slumped as it faced the notion that the "memory boom has peaked."
Most top market-cap stocks on the KOSPI are showing steep losses. As of 9:20 a.m. that day, Samsung Electronics was trading at 298,500 won, down 30,500 won (9.27%) from the previous transaction day. SK hynix was also trading at 1,904,000 won, down 166,000 won (8.02%).
The KOSDAQ index started trading at 959.61, down 42.83 points (4.27%) from the previous trading day (1,002.44). After falling more than 7% right after the open, a temporary suspension of program sell quotes (sell-side sidecar) was triggered.