Kospi Falls 2.3% to 7,643 After Nearly Touching 8,000 as Chip Rally Unravels

South Korea’s Kospi closed sharply lower after briefly climbing to the brink of 8,000, with intraday losses topping 5% at one point as volatility surged. Analysts attributed the swings to the side effects of extreme investor concentration in large semiconductor stocks.

The Kospi fell 179.09 points, or 2.29%, to close at 7,643.15 on May 12.

The benchmark climbed to 7,999.67 shortly after the open, then quickly plunged to 7,421.71 before recouping a large part of the decline.

Han Ji-young, an analyst at Kiwoom Securities, said the main reason was the market’s heavy tilt toward semiconductor shares. Stocks had surged too far, too fast in a short period, deepening FOMO, or fear of missing out. That appears to have fueled profit-taking, with the US-Iran war, caution ahead of the US April consumer price index report and foreign net selling serving as catalysts.

From the start of this month through the previous session, the Kospi had risen 18.54%. Samsung Electronics and SK Hynix, the two biggest stocks on the index by market capitalization, had climbed 29.48% and 46.19%, respectively.

Only two of 26 industries outperformed the Kospi from the start of May through May 11 -- semiconductors and autos -- a historically low number, Han said.

He added that investors should stay alert for now because the aftereffects of concentration in a handful of sectors could temporarily amplify volatility, as seen on May 12.

On the main board, foreigners were net sellers of 6.621 trillion won of shares and 213.9 billion won of Kospi 200 futures, weighing on the index. Institutions also sold a net 1.4191 trillion won, while individuals bought a net 7.9765 trillion won.

Most heavyweight stocks declined.

Samsung Electronics, SK Hynix and SK Square all fell, while LG Energy Solution slumped 5.34%. Doosan Enerbility lost 1.88% and Samsung C&T dropped 3.76%.

By contrast, HD Hyundai Heavy Industries and Samsung Electro-Mechanics rose 3.21% and 6.44%, respectively.

The Kosdaq index closed down 28.05 points, or 2.32%, at 1,179.29. In that market, foreigners were net buyers of 563.9 billion won of shares, while individuals and institutions sold 268.6 billion won and 259.1 billion won, respectively.

Kosdaq heavyweights were mixed.

Stocks broadly tied to the artificial intelligence theme mostly fell, including EcoPro BM, down 7.43%; EcoPro, down 4.58%; Rainbow Robotics, down 1.16%; and Leeno Industrial, down 6.39%.

Biotech shares, which had been weak, gained ground. Alteogen rose 5.23%, Kolon TissueGene advanced 4.44% and LigaChem Biosciences jumped 10.48%.

In Seoul's foreign-exchange market, the won was trading at 1,487.7 per dollar, down 15 won, or 1.02%, from the previous session.

Han Gyeong-woo, Hankyung.com reporter, case@hankyung.com