The domestic stock market plunged again after the previous day, unleashing an unprecedented panic session. Panic selling by individual investors poured into the KOSPI and KOSDAQ markets, triggering circuit breakers on both markets for the first time ever for two straight days.
Doubts about the global artificial intelligence (AI) investment cycle combined with concerns over intensifying semiconductor competition from China, chilling investment sentiment across Korea's semiconductor and IT value chain.
On the 29th, the KOSPI closed at 5,663.24, down 360.42 points (5.98%) from the previous day. The index opened at 6,089.11, up 65.45 points (1.09%) from the prior session, but after turning lower, a temporary suspension of program buy quotes (sell-side sidecar) was triggered at 10:55 a.m. The decline then deepened, showing extreme volatility as a level-1 circuit breaker was activated at 12:32 p.m.
The KOSDAQ closed at 662.68, down 43.17 points (6.12%) from the previous day. The KOSDAQ opened at 713.71, up 7.86 points (1.11%) from the day before, but a sell-side sidecar was triggered at 10:56 a.m. as losses widened. The slide accelerated further, and a circuit breaker was also triggered at 12:19 p.m.
This is the 15th circuit breaker activation in the Korea Exchange main board's history (ninth this year) and the 14th in the KOSDAQ market (fourth this year). The day before, the KOSPI and KOSDAQ each plunged intraday by 11% and 8%, respectively, tripping circuit breakers. It is the first time since the system was introduced in 1996 that circuit breakers were triggered on both markets for two consecutive days.
There has never been a case in the Korea Exchange main board's history where circuit breakers were triggered for two straight days. The KOSDAQ market also experienced two-day circuit breakers only twice, during the 2008 global financial crisis and the 2011 U.S. credit rating downgrade.
In the Korea Exchange main board, foreigners and individuals were net sellers of 1.2157 trillion won and 1.9767 trillion won, respectively, dragging the index down. Institutions, by contrast, were sole net buyers of 3.1489 trillion won. In the KOSDAQ market, foreigners and institutions were net buyers of 308.3 billion won and 146.4 billion won, respectively, while individuals were net sellers of 457 billion won.
In particular, foreign investors have been net sellers of more than 18.4 trillion won in the Korea Exchange main board this month on an accumulated basis, taking profits. By individual stock, they have net sold Samsung Electronics(005930) by 7.52 trillion won and SK hynix by 9.966 trillion won so far this month.
Brokerages cited as key reasons for the plunge in Korean stocks the spreading doubts about the profitability of big tech AI investments, concerns about intensifying competition due to China's semiconductor self-sufficiency drive, and forced deleveraging (margin calls).
Despite continued infrastructure investments by major global IT big tech corporations, growing concerns about deterioration in free cash flow (FCF) have brought the "AI bubble theory" back to the surface. Added to this were reports of Chinese companies catching up in semiconductor technology, which analysts said shattered investor sentiment across the IT value chain, including Korea's two leading semiconductor firms.
Earnings announcements and conference calls by corporations also fell short of market expectations, reinforcing the selling pressure, according to some assessments.
Kang Jin-hyeok, senior researcher at Shinhan Investment & Securities, said, "SK hynix announced strong results, including sales of 79.3 trillion won, up 256.8% on-year, and operating profit of 60.5 trillion won, up 557.2%, but they fell short of market expectations," adding, "After the conference call, selling emerged from disappointment over the lack of a concrete shareholder return policy." Kang added, "Samsung Electronics also turned lower, unleashing selling that led to sidecar triggers on both markets."
Most of the top market-cap stocks could not avoid steep losses. Samsung Electronics fell 5.23% to close at 208,500 won, while declines were pronounced among IT and semiconductor names such as SK hynix (-9.61%), SK Square (-8.11%), SK (-9.61%), and Samsung Electro-Mechanics (-7.63%). Hyundai Motor (-2.88%), LG Energy Solution (-4.30%), ##Samsung Biologics(-4.52%), KB Financial Group (-3.09%) also weakened.