Kospi Plunges More Than 8% Intraday as VKOSPI Hits Record High

Foreign and institutional investors drove an intraday drop of more than 8%

South Korea’s Kospi lurched through a "Black Friday" on June 26, falling more than 8% during the session. The market had recently rebounded on expectations of a stronger semiconductor cycle, but sentiment turned sharply after worries spread that surging memory demand could fuel "chipflation" and ultimately curb chip demand.

The Korea Exchange said the Kospi closed down 5.81% at 8,411.21. The index opened about 1% lower and extended its losses as foreign and institutional investors accelerated selling. They were net sellers of 5.4646 trillion won and 4.3682 trillion won, respectively, on the main board. Retail investors bought a net 9.4664 trillion won, but that was not enough to arrest the slide.

The selloff intensified after Apple and Microsoft raised consumer product prices amid a global shortage of memory chips, stoking concerns that information-technology companies could come under margin pressure. As losses widened, the Korea Exchange triggered a sell-side sidecar on the main board at 11:12 a.m. on June 26. After the index dropped as much as 8.19% shortly after noon, a circuit breaker was activated.

Lee Kyung-min, an analyst at Daishin Securities, said investors took rising memory prices as a negative because they could increase costs for hyperscalers and lead to softer semiconductor demand. Doubts also spread over valuations of artificial intelligence-related companies and investment demand tied to them, deepening the flight from risky assets.

Most large-cap stocks fell sharply, including Samsung Electronics, down 5.3%, SK Hynix, down 8.36%, SK Square, down 9.43%, and Hyundai Motor, down 4.47%. The decline was amplified by a plunge in semiconductor shares that sit within the orbit of single-stock leveraged exchange-traded funds. The Kospi was more volatile than China’s Shanghai Composite, which fell 2.26%, and Japan’s Nikkei 225, which dropped 4.15%.

Lee Jae-won, an analyst at Yuanta Securities, said the market has become more sensitive because of passive ETF flows concentrated in single-stock leveraged products and the biggest companies by market value. He said that imbalance in market flows would likely deepen. Since the launch of single-stock leveraged ETFs, Samsung Electronics' daily share-price swing has widened to 6.8% from 4.4%, while SK Hynix's has expanded to 7.8% from 5.1%, he added.

As volatility shook the local stock market, the VKOSPI, often called South Korea’s fear gauge, rose to 92.71. That was up 270% from a year earlier and well above the previous record of 89.30 set during the 2008 global financial crisis.

Cho Ah-ra, Hankyung.com reporter rrang123@hankyung.com