South Korea's benchmark equity index suffered a severe downturn on Monday, falling into a circuit-breaker pause after a steep retreat in chip-related stocks and heightened geopolitical tensions pushed investors away from risk assets.
The KOSPI dropped as much as 8.8% to 7,442.73 by 00:48 GMT, prompting the Korea Exchange to suspend trading in KOSPI-listed stocks for 20 minutes soon after the session opened. The pause represented a Level 1 market-wide circuit breaker, the second such activation this year. By the time trading resumed, the index was still down roughly 8.4%, hovering near the 7,400 mark.
Analysts attributed the sharp move in part to a global selloff in semiconductor equities that accelerated after investors reacted negatively to guidance from Broadcom Inc (NASDAQ:AVGO). Broadcom's forecasts weighed on sentiment in U.S. chip stocks on Friday, driving the Philadelphia Semiconductor Index down by more than 10%, its largest single-session decline since March 2020.
In Seoul, the rout was led by major semiconductor companies. Samsung Electronics (KS:005930) and SK Hynix Inc (KS:000660) registered steep early losses, compounding pressure on the broader index. The KOSPI had been among the top-performing equity markets this year as gains in semiconductor names, fueled by demand for artificial intelligence, pushed the index higher.
Investor nervousness was also intensified by a resurgence of conflict in the Middle East after Iran launched missiles at Israel. Market participants cited the renewed hostilities as an additional factor undermining confidence, amplifying concerns about global growth prospects, inflationary pressures, and potential downside to energy markets.
The market slide unfolded despite recent announcements underscoring South Korea's role in the AI supply chain. Nvidia (NASDAQ:NVDA) on Sunday disclosed partnerships with SK Hynix, Naver Corp (KS:035420), and Doosan (KS:000150) aimed at building AI data centres and so-called AI factories in the country. Those deals did not prevent the immediate pullback in share prices as traders reacted to the semiconductor earnings and guidance shock and to geopolitical developments.
Context and market reaction
- The circuit-breaker interruption lasted 20 minutes following the sharp price moves.
- Broadcom's guidance was widely cited as the catalyst behind the U.S. chip sector's large decline, which fed through to Asian markets.
- Geopolitical risk from missile strikes added to investor risk aversion, with knock-on concerns for growth, inflation, and energy prices.