South Korea KOSPI Plummets Over 8% Amid Chip Sector Sell-Off

South Korea's benchmark Korea Composite Stock Price Index (KOSPI) plunged more than 8% on Tuesday, falling below 6,300 points. The rapid decline triggered a sell-side sidecar mechanism at 9:06 a.m. and a 20-minute level 1 circuit breaker at 10:13 a.m. after the index shed over 542 points. The tech-heavy KOSDAQ index similarly lost over 6%. This volatility marks a significant correction, with the KOSPI falling 30% from its June 18 peak of 9,106, reversing a rally that had nearly quadrupled the market since April 2025.

The rout was primarily driven by a global sell-off of semiconductor giants Samsung Electronics and SK Hynix, whose shares dropped between 9% and 11%. Investor confidence in the chip sector was further shaken by the market debut of Chinese chipmaker ChangXin Memory Technologies (CXMT) on the Shanghai Stock Exchange, where its shares soared nearly 470% on Monday. Concerns also mounted following reports that a Chinese state-backed firm began producing immersion DUV lithography equipment, increasing competition for Korean firms.

Additional pressures contributing to the crash included escalating tensions in the Middle East, which drove up oil prices and inflation fears, as well as concerns regarding U.S. interest rate policies. High levels of leveraged trading accelerated the drawdown. While reports on the exact decline vary, the index fell between 7.41% and 8.04% by 10:16 a.m. local time.