A panic sell reminiscent of the 2008 global financial crisis and the 2020 novel coronavirus infection (COVID-19) pandemic swept the domestic stock market. On the 28th, the KOSPI closed at 6,023.66, down 732.09 points (10.84%) from the previous session.
During the session, a sell-sidecar and circuit breaker were triggered in quick succession, sharply chilling investor sentiment. It is the fifth time since 2000 that the KOSPI has fallen more than 10% in a single day.
In the financial investment industry on the 28th, analysts said this plunge differs in nature from past cases with excessive declines, such as the 2008 global financial crisis or the 2020 COVID-19 pandemic.
This month, the volatility cycle in the domestic stock market has shortened significantly compared with past crises. The circuit breaker has been triggered 14 times in history, including eight times this year alone. Since July began, market volatility has peaked, and stabilization mechanisms are operating frequently. Of the eight circuit breakers triggered this year, three have been concentrated in this month of July.
During past periods when the index plunged more than 10% in a day—such as the 2000 dot-com bubble (-11.63%), the Sept. 11, 2001, terror attacks (-12.02%), and the 2008 financial crisis (-10.57%)—there were clear external shocks capable of shaking the entire market, including financial system instability, a pandemic, or terrorism.
By contrast, this correction is explained as heightened volatility driven more by a rapid unwinding of concentrated positions in the semiconductor sector than by warning signs in the real economy or the financial system.
Kim Seok-hwan, a researcher at the Mirae Asset Securities research center, said, "The biggest backdrop for the expanded volatility throughout this year is excessive concentration in semiconductors," adding, "The domestic semiconductor index rose far more steeply than major overseas semiconductor indexes in the first half of this year, producing a temporary overshooting phenomenon, and the recent correction can be seen as a process of closing that gap."
He explained that the domestic semiconductor sector rose much faster than global competitors, concentrating flows, and the simultaneous rush of profit-taking supply and the liquidation of leveraged funds widened the decline.
Kim said, "Since 2000, there have been only five cases, including today, where the KOSPI fell more than 10% in a day," adding, "In the past, oil prices, interest rates, and exchange rates wobbled simultaneously, expanding system risk, whereas this time, macroeconomic variables are relatively stable, and the biggest difference is that concentration in certain industries and stocks has amplified volatility."
In the market, the recent rise of Chinese memory companies and expectations for localization of semiconductor equipment are seen as further depressing investor sentiment. Even without confirmed changes in competitiveness, concerns about China's technological catch-up have spread, weakening expectations for the semiconductor sector overall.
Lee Kyung-min, a researcher at Daishin Securities, said, "It is not that the economy or corporations' earnings have deteriorated rapidly, but that psychological anxiety is weighing on the market," diagnosing, "On top of the semiconductor concentration, the liquidation of leveraged ETFs and the decline in transaction value after tighter regulations have combined to create a structure in which foreign selling shakes the entire market significantly."
He assessed that the market is in a phase of reacting far more sensitively to bad news than to good news. In other words, an adverse cycle is repeating in which the possibility of unverified Chinese technological development is taken as a fait accompli, leading to selling.
Experts advised that in the short term, given that much of the decline has been priced in, there is room to keep the door open to a technical rebound. Lee said, "The KOSPI 6,000 level is about five times on a 12-month forward price-earnings ratio (PER) basis, historically a low valuation," adding, "Around the 5,800 level overlaps with key technical support lines, so we judge it to be close to a bottom."
He added, "This week's scheduled SK hynix(000660) and earnings releases from Samsung Electronics, Meta, and Amazon will be a watershed that determines the future direction of the stock market, depending on how much they can dispel the market's doubts about the profitability of artificial intelligence (AI) investment."