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South Korean stocks plunged on the 8th in a "Black Monday," as worries over an interest-rate hike following surprisingly strong U.S. employment data combined with debate over a semiconductor peak. The Kospi fell more than 8% shortly after the open, triggering a circuit breaker for the third time this year, while the Kosdaq tumbled more than 9%, prompting its first circuit breaker in three months. The shock from a simultaneous slide in U.S. semiconductor stocks over the weekend spilled over into a sell-off of major domestic stocks including Samsung Electronics (005930) and SK hynix (000660).
According to the Korea Exchange, the Kospi closed at 7,484.41, down 676.18 points (8.29%) from the previous session. The Kospi opened at 8,048.09, down 112.50 points (1.38%), but quickly widened its losses shortly after the open, falling to around 7,470.
A circuit breaker was triggered early in the session on the securities market. It was the third this year, following March 4 and March 9. A circuit breaker halts trading across the entire market in stages—for 20 minutes or until the close—when the Kospi or Kosdaq index falls 8%, 15%, or 20% or more from the previous session for one minute.
At 9:34 a.m., a sell sidecar (a temporary suspension of program sell orders) was also triggered. It marked the second consecutive trading day after the 5th. A sell sidecar suspends the effect of program trading orders for five minutes when the Kospi 200 futures price falls 5% or more from the reference price for at least one minute.
By investor type, institutions and foreigners drove the index down. On the securities market, individuals net bought 1.7617 trillion won, while foreigners and institutions net sold 374.9 billion won and 1.6241 trillion won, respectively.
Top market-cap stocks all fell sharply. Samsung Electronics closed at 295,500 won, down 10.18%, while SK hynix recorded 1,911,000 won, down 7.68%. Samsung Electronics preferred (005935) (-8.77%), SK Square (402340) (-11.13%), Hyundai Motor (005380) (-8.71%), Samsung Electro-Mechanics (009150) (-5.29%), Samsung Life Insurance (032830) (-8.97%), and Samsung C&T (028260) (-11.29%) also fell sharply.
The shock to the Kosdaq was even greater. The Kosdaq index closed at 911.39, down 91.05 points (9.08%) from the previous session. The Kosdaq opened at 959.61, down 42.83 points (4.27%), and a sell sidecar was triggered at 9:06 a.m. It was the fourth this year. A Level 1 circuit breaker was also triggered at 2:36 p.m. It was the first Kosdaq circuit breaker in about three months since March. On the Kosdaq market, foreigners net bought 279.6 billion won, while individuals and institutions net sold 124.4 billion won and 146.6 billion won, respectively.
The sharp drop in U.S. stocks dealt a direct blow to domestic markets. U.S. nonfarm payrolls for May, released on the 5th, rose by 172,000, far exceeding the market estimate of 85,000. As the strong employment heightened concerns over a possible rate hike rather than an economic slowdown, the U.S. 10-year Treasury yield rose above 4.5%.
Adding to this, semiconductor investor sentiment quickly froze as some global investment banks (IBs) raised the argument that memory chip prices had peaked, and Broadcom's artificial intelligence (AI) chip revenue outlook fell short of market expectations. On the 5th (local time), the sharp declines in U.S. stocks such as Micron (-13.3%), SanDisk (-11.4%), Intel (-11.3%), and Nvidia (-6.2%) also increased selling pressure on domestic semiconductor stocks.
Concerns over a large-scale initial public offering (IPO) and Big Tech rights offerings also weighed on supply and demand. With SpaceX set to raise about $75 billion through an IPO on the 12th, the market is worried that demand may emerge to sell existing shares to raise funds for public offering subscriptions. Reports that Meta is considering a rights offering worth tens of billions of dollars, following Google's $85 billion rights offering, also pressured tech stock sentiment.
The securities industry believes index volatility is unlikely to subside easily this week. A string of events still remain to be digested. Han Ji-young, a researcher at Kiwoom Securities, said, "This week, the Kospi is expected to continue its phase of expanded volatility as it digests the aftermath of the sharp U.S. stock decline, the direction of market rates following the U.S. May CPI, Oracle's earnings, the SpaceX listing, the simultaneous expiration of domestic futures and options, and the burden of the dollar-won exchange rate."
Meanwhile, in the Seoul foreign exchange market, the won-dollar exchange rate ended daytime trading at 1,535.0 won, down 4.1 won from the previous day. The rate opened at 1,555.2 won, up 16.1 won from the previous session's daytime closing price (as of 3:30 p.m.). It was the highest level since the financial crisis. However, the gain narrowed as foreign exchange authorities engaged in verbal intervention and the National Pension Service resumed currency hedging.
