The AI-fueled rally that propelled South Korea's KOSPI to record highs above 9,000 has abruptly reversed. On Tuesday, the benchmark plunged over 7% to trade at 7,478.61, down 572.72 points as of 9:50 am IST, according to a report by Business Today. The sell-off was triggered by profit-taking after Samsung Electronics unveiled stronger-than-expected quarterly earnings, and it forced the Korea Exchange (KRX) to activate a sell-side sidecar to calm the market.
Sell-side sidecar activated
Investors rushed to lock in profits after Samsung Electronics' earnings release, triggering a broad sell-off in heavyweight technology stocks. Programme trading on the KOSPI was suspended for five minutes at around 10:23 am after the index plunged sharply, Business Today reported, citing Yonhap News Agency.
Samsung earnings fail to stem selling
Samsung Electronics projected an operating profit of 89.4 trillion won ($58.4 billion) for the April-June period, beating the average market forecast by 6.2%, according to Yonhap Infomax. The estimate includes provisions for employee bonuses; excluding those, quarterly operating profit is estimated to have reached around 100 trillion won.
Despite the strong result, Samsung shares slumped 7.4%, and the broader technology sector fell. SK Hynix dropped 6.4% ahead of its planned US listing later this week. Other major decliners included Hyundai Motor (-5.9%), Hanwha Aerospace (-4%), and Hanwha Ocean (-23%) after a South Korean consortium led by the shipbuilder failed to secure Canada's multibillion-dollar submarine procurement project.
Broader market and currency
Among the few gainers, cosmetics maker Amorepacific rose 2.9% and refiner SK Innovation gained 3.9%.
The Korean won strengthened slightly, trading at 1,527.40 against the US dollar, up 2.6 won from the previous session.
Foreign and institutional selling
| Investor Type | Net Change (won) |
|---|---|
| Foreign investors | -1.74 trillion |
| Institutional investors | -97.3 billion |
| Individual investors | +1.81 trillion |
Foreign investors were the biggest sellers, offloading a net 1.74 trillion won worth of shares, while institutions sold 97.3 billion won ($64 million). Individual investors emerged as net buyers with purchases worth 1.81 trillion won, Business Today reported.
Monday's reversal sets the stage
Tuesday's sharp decline followed a similar pattern on Monday, when the KOSPI surrendered early gains of over 2% to close more than 2% lower as investors reassessed elevated valuations in AI-linked stocks. That decline also dragged the MSCI Emerging Markets Asia Index, with South Korea accounting for more than a quarter of the benchmark, according to Reuters.
Geopolitical concerns related to the Middle East have eased somewhat, but investors are now questioning whether AI enthusiasm can continue to justify lofty valuations.
SK Hynix listing remains in focus
Investor attention remains fixed on South Korea's semiconductor industry. Reuters reported that SK Hynix is preparing for a US listing expected to raise around US$28-29 billion, making it one of the world's largest share offerings. The company's shares had already fallen 4% during Monday's session. Markets are now entering the corporate earnings season, with technology companies expected to continue benefiting from robust AI-driven demand.
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