Black Tuesday! Japanese and Korean stock markets collectively pull back, Korean stocks drop nearly 10%
Source: Jinse Finance
The current round of AI chip rally in Korea has seen extreme price surges. SK Hynix, which had just surpassed Samsung to become the most valuable company by market capitalization, suffered a sharp drop. High-leverage ETFs magnified the volatility, and regulatory agencies are preparing market stabilization plans.
On Tuesday, most Asian stock markets declined as investors took profits from continuously surging AI-related stocks, forming a stark contrast with Monday's market performance.
Among them, South Korea's KOSPI Index became the worst-performing major stock index in Asia, closing down 910.49 points, a drop of 9.99%, marking the largest single-day decline since March 4, closing at 8,204.06 points. Both SK Hynix and Samsung Electronics fell over 12%. On June 23 (Tuesday), the Nikkei 225 Index closed down 2,565.58 points, or 3.55%, at 69,788.38 points.
That day, both the KOSPI and KOSDAQ indices in South Korea triggered circuit breakers during the session due to sharp declines. This round of correction was led by heavyweight semiconductor stocks, including SK Hynix and Samsung Electronics, known as the "memory chip twins." In the previous trading session, SK Hynix officially surpassed Samsung in market cap to become Korea’s top listed company, reflecting just how extreme the AI chip rally has been.
According to Bloomberg, foreign investors were net sellers of over 2 trillion Korean won (approximately $1.3 billion) in Korean stocks during Tuesday's morning session, while retail investors made small-scale purchases. Before this correction, the KOSPI had only closed lower twice in seven days, leading to a concentrated release of downward pressure amid overheated valuations and weakening sentiment.
Ha SeokKeun, Chief Investment Officer at Eugene Asset Management in Seoul, Korea, analyzed: "The core of this sell-off is profit-taking after continuous surges, as the market was extremely overbought. High-leverage margin buying by retail investors further amplified the decline, making the market highly sensitive to negative catalysts."
The market sees this week's Micron Technology earnings as a critical watershed for the chip rally. Pepperstone strategist Dilin Wu stated that the strength or weakness of Micron's performance will directly affect Samsung and SK Hynix, ultimately determining whether the bullish trend in the hardware AI supply chain can be sustained.
This year, Korea has been the world's best-performing major stock index, but volatility risks have also surged, with leverage ETFs linked to chip stocks intensifying market fluctuations.
Lee Chan-jin, head of South Korea's Financial Supervisory Service, publicly stated on Monday that regulators regret loosening policies on high-risk leveraged ETFs and are studying stabilization measures to curb the wild swings of ETFs tracking Samsung and SK Hynix. Before this pullback, SK Hynix had posted gains for eight consecutive trading days.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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