The KOSPI plunged 1,317 points over three trading sessions, hit by a combination of concerns over interest rate hikes and fears that artificial intelligence (AI) chip stocks had peaked. Circuit breakers were triggered in both the KOSPI and KOSDAQ markets for the first time in about three months, since March 4 this year, just after the start of the Middle East war between the United States and Iran.
According to the Korea Exchange on Monday, the KOSPI closed at 7,484.41, down 676.18 points, or 8.29%, from the previous session. The KOSDAQ index ended at 911.39, down 91.05 points, or 9.08%. The KOSPI's market capitalization stood at 6,131.3079 trillion won, with 554 trillion won evaporating in a single day. After breaking through the 8,800 level on the 2nd of this month, the index fell for three consecutive sessions, putting support at the 7,000 level to the test.
The main causes of the market plunge are cited as the possibility of a rate hike by the U.S. Federal Reserve and concerns that chip earnings have passed their peak. New U.S. nonfarm payrolls in May exceeded expectations, spreading expectations of a rate hike, and the U.S. 10-year Treasury yield surpassed 4.57%. Amid rate pressures, the Philadelphia Semiconductor Index plunged 10.26% on Friday, and Samsung Electronics and SK hynix fell 10.18% and 7.68%, respectively, dragging down the market on the day.
A high exchange rate is also fueling the outflow of foreign capital from the stock market. Foreign investors sold 69.7751 trillion won worth of stocks in the securities market over 21 consecutive trading sessions. The won-dollar exchange rate opened at 1,555.2 won, up 16.1 won from the previous session, but closed at 1,535.0 won, aided by verbal intervention from financial authorities.
Securities analysts are leaning toward the possibility that this plunge will remain a short-term correction rather than a downward trend. However, this week's "Quadruple Witching Day" (the simultaneous expiration of futures and options), the release of the U.S. Consumer Price Index (CPI), and the SpaceX initial public offering (IPO) are variables. Ko Tae-bong, head of the iM Securities Research Center, said, "Unlike in the past, this is a phase in which technology is driving the macroeconomy," adding, "The recent decline is closer to a short-term price correction that appears in a bull market, and it could end within a week."
