Kospi Trading Halted After 8% Plunge, Triggering First Circuit Breaker in 78 Days

Kospi hits circuit breaker for first time in 78 days

Foreign selling of 3.4224 trillion won slams semiconductor stocks

Hotter US inflation and AI investment jitters chill risk appetite

The Korea Exchange triggered a Level 1 circuit breaker on the benchmark Kospi market at 12:38 p.m. on Oct. 15. The Kospi was down 480.76 points, or 8.00%, at 5,528.05 at the time. It was the first such halt since July 29 and the 10th this year. A circuit breaker had already been triggered on the Kosdaq market at 12:23 p.m.

A Level 1 circuit breaker is activated when an index stays down more than 8% from the previous close for at least one minute. Trading is then suspended for 20 minutes, followed by a 10-minute call auction. The measure is stronger than a sidecar, which only temporarily suspends program sell orders. Trading in both markets later resumed after sell-side sidecars were triggered in the morning and circuit breakers in the afternoon.

The Kospi fell as low as 5,506.23, widening its loss to 8.36%. That was the lowest intraday level since July 29. The index has dropped about 41% from its record high of 9,385.59 set on June 19. It later trimmed some of the decline and was down 419.62 points, or 6.98%, at 5,589.19. The Kosdaq was trading at 765.11, down 58.77 points, or 7.13%, at the same time.

Foreign investors drove the selloff. They were net sellers of 3.4224 trillion won on the Kospi on Oct. 15. Retail investors and institutions were net buyers of 1.2968 trillion won and 1.6092 trillion won, respectively, but that was not enough to stop the slide. Foreign investors had already been net sellers for seven straight sessions from Oct. 2 through the previous day.

Selling was concentrated in large-cap semiconductor shares. Samsung Electronics fell 8.94% to 211,250 won, while SK Hynix dropped 10.15% to 1.275 million won. Their heavy weighting in the Kospi amplified the broader index decline.

The first blow to sentiment came from stronger-than-expected US inflation. The US consumer price index for September, released on Oct. 14, rose 3.7% from a year earlier, topping the market estimate of 3.6%. Core CPI, which excludes food and energy, also beat forecasts, rising 2.6% versus expectations of 2.5%. The data heightened concern that the Federal Reserve could raise interest rates again.

Doubts over the sustainability of AI companies’ investment spending also weighed on chip shares. CoreWeave, the US AI cloud company, plunged 15.46% overnight. Concerns spread over its business model of financing data centers and equipment through borrowing, then repaying debt with customer usage fees, after yields on some of its corporate bonds climbed above 15%.

That adds pressure to earnings expectations for South Korean memory chipmakers. If AI infrastructure companies face tighter financing conditions, the pace of data center investment could slow. That could also affect orders for high-bandwidth memory, or HBM, and server memory. Rising rate pressure and uncertainty over AI demand appeared to add to selling in domestic semiconductor stocks.

Technology shares were also hit harder on Wall Street overnight. The Nasdaq Composite fell 1.88% and the S&P 500 dropped 1.11%. The Dow Jones Industrial Average slipped 0.09%. The tech-led selloff that started in the US spilled into South Korea’s stock market, where semiconductor names carry heavy weight, leading to temporary trading halts in both markets.