Kospi Drops More Than 5%, Falls Back Below 7,000 as Samsung Electronics, SK Hynix Sink

The Kospi fell more than 5% in early trading on July 16, dropping back below 7,000 and triggering a temporary halt on program sell orders known as a sidecar.

The Korea Exchange said it activated a sell-side sidecar for the Kospi market at 9:10:26 a.m. on July 16. It was the first such trigger in three trading days, following the previous one on July 13. The bourse has activated a sidecar in the Kospi market 37 times this year.

Under Korea Exchange rules, program buy or sell orders are suspended for five minutes when the most actively traded Kospi 200 futures contract rises or falls more than 5% from the previous session's close and maintains that move for one minute. When the sell-side sidecar was triggered, Kospi 200 futures were down 5.22% at 1,104.40.

In the main board market, foreigners and institutions were net sellers of 98.3 billion won and 108.4 billion won, respectively. Individuals were the only net buyers, purchasing a net 212.2 billion won worth of shares. Samsung Electronics and SK Hynix, the two largest companies by market capitalization, both traded lower. As of 9:35 a.m., Samsung Electronics was down 7.51% at 258,500 won, while SK Hynix had fallen 10.04% to 1.873 million won.

Other decliners included SK Square, down 11.36%, Samsung Electro-Mechanics, off 9.34%, Hyundai Motor, down 1.50%, and Samsung Life Insurance, down 2.67%. Gainers included LG Energy Solution, up 2.99%, KB Financial Group, up 1.16%, and Samsung Biologics, up 0.51%. The Kosdaq was down 19.70 points, or 2.38%, at 809.73 at the same time.

The sharp early drop was seen as reflecting mounting concern over the durability of investment in artificial intelligence infrastructure. Morgan Stanley said in a report that rising electricity charges and environmental burdens were leading to more cancellations and delays in data-center projects. That sharpened long-running worries over AI infrastructure spending and further weakened investor sentiment.

Overnight, all three major US stock indexes closed higher as wholesale inflation eased and large technology stocks advanced together. The Dow Jones Industrial Average rose 150.37 points, or 0.29%, to 52,658.64. The S&P 500 gained 28.81 points, or 0.38%, to 7,572.40, while the Nasdaq Composite climbed 162.22 points, or 0.62%, to 26,269.23.

Still, South Korean stocks came under pressure as investors in New York rotated out of semiconductor shares and into large-cap technology names. Micron Technology fell 8.02%, while Intel dropped 4.43% and Advanced Micro Devices lost 3.46%. The VanEck Semiconductor ETF declined 1.6%. SK Hynix American depositary receipts also fell 9.00% to close at $176.46 a share.

Kim Yu-mi, an analyst at Kiwoom Securities, said South Korea's stock market was retracing part of the previous session's gains led by semiconductor stocks, following the drop in US chip shares. Recent highfliers in AI and semiconductors are seeing profit-taking, while buying interest is moving into major platform companies such as Apple, Alphabet and Amazon, she added.

Kang Kyung-ju, Hankyung.com reporter qurasoha@hankyung.com