South Korean KOSPI Plunges 8% as Chip Stocks SK Hynix and Samsung Slide

Market data showed that the Korea Composite Stock Price Index (KOSPI) plunged as much as 8% intraday, falling below the 8,400-point mark.
In terms of individual stocks, the “memory chip duo” both suffered heavy losses. SK Hynix fell more than 11%, while Samsung Electronics dropped over 8%.

June 23 – Concerns over the excessive expansion of the recent rally resurfaced, prompting investors in the South Korean market to aggressively sell off leading chip stocks on Tuesday (June 23), driving the benchmark index sharply lower.

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Market data indicated that the KOSPI plunged 8% intraday, breaking below the 8,400-point level. For the second time in the afternoon, the Korea Exchange triggered the KOSPI circuit breaker as KOSPI 200 index futures dropped 5%, suspending program trading for five minutes.

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During the morning trading session, foreign investors offloaded more than 2 trillion won (approximately $1.3 billion) of KOSPI constituent stocks, while retail investors increased their holdings.

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Prior to this sharp pullback, the KOSPI had regained upward momentum and set a series of record highs, surpassing the 9,000-point threshold for the first time last week as investors set aside uncertainties related to the war with Iran.

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Lee Jae Mahn, a strategist at Hana Securities in Seoul, noted that the Korean stock market has recently shown several signs of overheating, including SK Hynix’s valuation exceeding that of Samsung.

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Lee stated that for the KOSPI to advance further, it would be reasonable for Samsung’s stock to outperform SK Hynix, given that Samsung’s second-quarter profits are expected to surpass those of SK Hynix.

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Notably, during Monday’s U.S. trading session, global investors’ optimism toward high-flying technology stocks began to waver, with SpaceX shares declining significantly. Market attention also shifted toward memory chip maker Micron Technology, which is set to release quarterly earnings later this week.

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“Micron’s earnings this week are the real test,” said Dilin Wu, strategist at Pepperstone Group. “Strong earnings would directly reflect in the share prices of Samsung and SK Hynix—this data will indicate whether there is still room for upside in the hardware side of the AI trading boom.”

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Ha SeokKeun, chief investment officer at Eugene Asset Management in Seoul, commented: “The latest sell-off appears to be primarily driven by profit-taking following the recent sharp gains, as the market has become increasingly overbought.”
High retail leverage and margin balances likely amplified this decline, making the market more sensitive to negative catalysts.

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The recent drop in the KOSPI index also highlights the growing volatility of what has been the world’s best-performing major stock index this year. In particular, leveraged ETF products linked to chip manufacturers have exacerbated price swings.

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On Monday, Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS) of South Korea, made remarks regarding the overheated investment in single-stock leveraged ETFs for Samsung Electronics and SK Hynix, expressing deep regret over the introduction of such products and stating that regulators are formulating investor protection measures.

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Lee stated that it was inappropriate to have initially permitted these high-risk products to be listed. “Due to extremely high turnover rates, brokerage firms have reaped substantial profits. My personal concern is that participating investors have not realized actual gains, with only asset management operators profiting from these products.”

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It is worth noting that the craze for SK Hynix leveraged ETFs has not been confined to the Korean stock market; a similarly fervent wave has emerged in the Hong Kong market.

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Note: The yellow line indicates the asset scale trend of the Hong Kong 2x Long Hynix leveraged fund.

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The strong performance of SK Hynix has also driven the CSOP 2x Long Hynix fund to surge. As of Monday’s close, the product’s market value had exceeded HK$130 billion, making it the largest ETP in Hong Kong, breaking the 27-year streak of Tracker Fund of Hong Kong (2800.HK) holding the top spot in terms of ETP scale in the Hong Kong stock market.

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