The KOSPI index plunged 10.84% on the 28th, sliding to just above the 6,000 level. It was the second-largest drop this year after the KOSPI crashed on Mar. 4 due to the outbreak of the U.S.-Iran war. It also ranked as the fourth-largest single-day decline on record.
On the day, Korea's stock market was hit by heavy selling as worries spread about China accelerating its push for semiconductor self-sufficiency. Sell-sidecars and circuit breakers were triggered in both the main board and the KOSDAQ market during trading, but they were not enough to stem the deluge of panic selling.
The KOSPI closed at 6,023.66, down 10.84% from the previous session. The index fell 732.09 points on the day, the second-largest point drop on record. The KOSDAQ ended at 705.85, down 59.01 points (7.72%) from the day before.
Opening at 6,400.27, down 355.48 points (5.26%), the KOSPI widened its losses intraday. Shortly after the open, sell-sidecars and circuit breakers were activated in both markets in succession, but they fell short of stopping the plunge. At one point in afternoon trading, the KOSPI fell through 6,000 and the KOSDAQ slipped below 700.
Foreign investors led the decline on the main board. Foreigners were net sellers of 5.7478 trillion won on the main board. In contrast, individuals and institutions were net buyers of 5.3004 trillion won and 412.3 billion won, respectively. In the KOSDAQ market, individuals and foreigners were net buyers of 53.3 billion won and 88.5 billion won, while institutions alone were net sellers of 141.3 billion won.
The domestic market tumbled on the day under the threat of a rally by Chinese semiconductor firms. Cho Ain, a Samsung Securities analyst, said, "Investor sentiment weakened as caution in the credit market over Chinese semiconductors' technological self-sufficiency and artificial intelligence (AI) investment overlapped," adding, "With big tech earnings and the Federal Open Market Committee (FOMC) ahead this week, risk-off selling has emerged, further amplifying market volatility."
Overnight reports that a Chinese chip equipment maker may mass-produce deep ultraviolet (DUV) lithography systems for semiconductor manufacturing fueled perceptions that China's chip self-sufficiency could progress faster than expected. ASML shares slumped in response.
Also weighing on sentiment was the successful STAR Market listing of Changxin Memory Technologies (CXMT), China's No. 1 memory chipmaker. In the United States, semiconductor stocks, including the Philadelphia Semiconductor Index and names such as Nvidia and SanDisk, also tumbled.
Samsung Electronics and SK hynix shares plunged on the day. Samsung Electronics sank more than 13% to close at 220,000 won, dropping out of the $1 trillion market cap club. SK hynix also slumped 14% to the mid-1.5 million won range. Kang Jin-hyeok, a Shinhan Investment & Securities analyst, said of the sharp falls in Samsung Electronics and SK hynix, "With no dip-buying, they slipped helplessly below the 120-day moving average."
Cho said, "From a technological maturity perspective, it is unlikely that China's mass production of chip equipment will pose an immediate threat to the global semiconductor ecosystem," but added, "However, the steep pace of China's chip technology development is stoking investor concerns."
Meanwhile, more investors are questioning big techs' financial soundness amid expanding AI infrastructure spending. That's because credit default swap (CDS) premiums for major AI corporations, including Oracle, SpaceX, Alphabet, Amazon, Meta, and Nvidia, have all risen in unison.
Cho said, "It appears the credit market has begun to reflect cash flow burdens stemming from large-scale AI investment," adding, "On top of that, Nvidia has successively announced major deals totaling $750 billion with SK Group, OpenAI, and others, reigniting the controversy over 'AI circular transactions.'"
Although the KOSPI index is clearly in an undervalued zone, the absence of clear buying interest is being noted. Cho said, "The KOSPI index has entered a technically oversold phase, and its valuation is also in a historically undervalued range," but added, "However, the lack of a distinct buying constituency is a constraint on a KOSPI rebound."