KOSPI plunges 8.8% as chip rout deepens on US rate fears

The KOSPI dived as much as 8.8% on Monday, triggering a 20-minute trading halt, after robust US jobs data crushed hopes for further Federal Reserve rate cuts.

"A surprise in US employment data triggered bond yield rises and provided an excuse for correction in an overheated market amid accumulated pressure from the surge in semiconductor stocks," said Han Ji-young, an analyst at Kiwoom Securities.

Samsung Electronics and SK Hynix, the index's two heaviest-weighted stocks, each fell more than 10% in early trade before paring losses. Samsung was last at KRW 312,750, down 5.17%, while SK Hynix traded at KRW 2.024 million, off 2.22%. Foreign investors were net sellers of 200 billion won ($128.86 million), extending their selling streak to 21 consecutive sessions. The won strengthened 0.4% to 1,552.4 per dollar after hitting its weakest level since March 2009 at 1,615 on Friday, prompting authorities to hold an emergency meeting Sunday where they pledged stern action against speculative trading.

Despite Monday's rout, the KOSPI remains up 83% year-to-date after surging 76% in 2025 — its biggest annual gain since 1999 and the top performance among major global markets last year. Goldman Sachs' Chief Asia Pacific Equity Strategist Timothy Moe said the selloff represents a technical correction, with fundamentals remaining strong and valuations now "very reasonable." He expects the market to rebound and reach new highs, as potential earnings continue to drive gains.

The selloff tracked Friday's carnage on Wall Street, where the Nasdaq Composite fell 4.2% and the Philadelphia Semiconductor Index slumped 10% after payrolls data showed the US economy added 353,000 jobs in May — double the 175,000 consensus estimate. The iShares MSCI South Korea ETF, a proxy for US-listed exposure to Korean equities, plunged 14% in Friday's session.

Circuit breakers were activated at 0003 GMT, halting KOSPI trading for 20 minutes for the first time in three months. It was the third time they were triggered this year and the ninth in history. A separate "sidecar" curb was activated immediately after trading resumed, limiting the index's losses to 4.6% by late morning.

Han said increased volatility is inevitable in the near term but added that a prolonged rout is unlikely given that "the KOSPI's valuation pressure has been lowered by recent correction and earnings momentum remains strong for semiconductor stocks."

The won's sharp depreciation has become an additional concern for foreign investors. After breaching the 1,600 level against the dollar for the first time in 17 years on Friday, South Korean authorities convened an emergency meeting and warned of stern action against speculative trading. The currency has weakened more than 10% against the dollar this year, compounding headwinds for an export-dependent economy that relies heavily on semiconductor sales.

Moe noted that while speculative activity by South Korean retail investors had increased in recent months, leveraged ETF investors are now exiting the market — a dynamic that historically signals the end of overheated positioning rather than the start of a structural decline.

This article is for informational purposes only and does not constitute investment advice.