KOSPI Falls Into Bear Market as Chip Stock Rout Triggers Algorithmic Trading Halt
Taylor Wilson
KOSPI closed down 5.35% on Wednesday, tumbling more than 20% from its all-time high to formally enter a technical bear market; Samsung Electronics and SK Hynix led the decline, algorithmic trading was briefly halted, and markets now await clarity on AI spending.
How big was the drop, and how did it unfold?
KOSPI closed at 7,246.79, down 5.35% on the day. The index has now fallen more than 20% from its June 22 all-time high of 9,114.55. This means → by Wall Street's standard definition, South Korea's stock market has officially entered a technical bear market.
The session was violently volatile: after opening lower, the index briefly rallied 1.8%, then reversed sharply to a maximum intraday loss of 6.1%, triggering the "sidecar" mechanism — a circuit breaker that temporarily halts algorithmic program trading.
The previous day, KOSPI had already fallen 4.9% and tripped its sixth circuit breaker of the year — the twelfth in its history. In plain terms = two consecutive days of crashes pushed the market's automatic safeguards to their limits.
Why were chip stocks the biggest drag?
Samsung Electronics fell 6.3%; SK Hynix dropped 5.7%. Together they were the heaviest weights pulling the index down.
The trigger came from overnight U.S. trading: the Philadelphia Semiconductor Index fell 4.7%, and fears over the sustainability of AI-related capital spending spread from the U.S. to Korean chip stocks.
Kiwoom Securities analyst Han Ji-young noted that despite Samsung's strong earnings, the market remains worried about slowing memory-chip price growth and uncertainty around a profit "peak." This reflects a dynamic where macro-level fear is overriding company-level fundamentals.
What are regulators doing?
South Korea's finance minister explicitly pledged to closely monitor risk factors that could amplify volatility, singling out recently launched single-stock leveraged ETFs tied to chip names — products that magnify gains and losses on individual stocks. This means → regulators believe leveraged products are amplifying the sell-off.
Vice finance minister Moon Ji-sung addressed the currency, saying the supply-demand dynamics in the dollar-won market are expected to shift in the second half, with selling pressure from foreign profit-taking and rebalancing likely to ease gradually.
He also flagged SK Hynix's upcoming U.S. equity offering — roughly $29 billion in size — which could become one of the largest stock offerings in Asian corporate history and would generate won-buying demand.
What changed with foreign flows and the currency?
On Wednesday, foreign investors net bought approximately 335.9 billion won in Korean equities, ending a streak of 13 consecutive trading days of net selling. In plain terms = after nearly three weeks of relentless selling, foreign money finally started buying again.
The won strengthened past the 1,500 level, settling at 1,498.5 per dollar onshore — up 1.2% and the strongest since May 29.
Dollar selling linked to SK Hynix's U.S. equity offering has already appeared in the won forward market. This reflects the market pricing in currency-conversion demand ahead of that massive deal.
What comes next?
Two key checkpoints to watch: whether SK Hynix's U.S. listing proceeds smoothly, and whether AI capital-spending expectations stabilize.
This means → if the roughly $29 billion offering goes through, it would both generate real won demand to support the currency and signal that the fundraising window for major chip companies remains open.
Conversely, if the offering stalls or AI spending expectations continue to deteriorate, this technical bear market may not have found its floor yet.
Content is for reference only, not financial advice.