KOSPI crashes 10.8% to 6,023 as chip rout deepens

The KOSPI tumbled 10.84% to 6,023.66, breaching 6,000 intraday, as Chinese chip competition and AI profitability fears triggered the year's eighth circuit breaker.

"Investors are pricing low-probability risks as if they're already realized," said Lee Kyung-min, an analyst at Daishin Securities. "The market needs a catalyst to reverse this sentiment."

SK Hynix plunged more than 14% and Samsung Electronics dropped over 13%, with the two stocks accounting for more than half of KOSPI's market capitalization. Foreign investors offloaded a net 3.7 trillion won ($2.7 billion) in a single session, overwhelming buying from retail and institutional investors. The KOSPI's 12-month forward price-to-earnings ratio fell to about five times, the lowest since 2000, while the semiconductor sub-index's forward P/E slipped below four times.

The selloff leaves the KOSPI down 28.85% from its intraday high this month, far exceeding the 5.49% decline in the Nasdaq and even the 21.42% drop in the Philadelphia Semiconductor Index over the same period. All eyes now turn to earnings from SK Hynix on Tuesday and Samsung Electronics on Wednesday, with analysts warning a failure to restore confidence could push the index to 5,800.

Earnings Season Holds the Key

The rout was triggered by two simultaneous shocks. Chinese memory chipmaker ChangXin Memory Technologies surged 465% on its Shanghai STAR Market debut Sunday, stoking fears that China's expanding storage capacity will intensify competition and divert global semiconductor investment away from Korean producers. At the same time, Alphabet's free cash flow turning negative reignited debate over whether massive AI capital spending can generate sustainable profits.

The KOSPI's forward P/E of five times is at a historic low, but analysts caution that cheap valuations alone may not stem the selling. Kim Byung-yeon, an analyst at NH Investment & Securities, had previously viewed 6,000 as a reasonable floor based on 1.3 to 1.4 times forward price-to-book. Trading turnover has fallen below 10 trillion won, amplifying the index's moves as leveraged positions are unwound and investors await margin rule changes taking effect July 31.

SK Hynix is expected to report a second-quarter operating profit margin of 75% to 77%, its third consecutive quarter above Taiwan Semiconductor Manufacturing Co., driven by its leadership in high-bandwidth memory and surging AI data center demand. But the market's focus will be on forward guidance — whether the company can reassure investors that demand for its HBM products remains intact despite the broader AI spending debate.

This week's earnings calendar is dense. Beyond SK Hynix and Samsung, Microsoft and Meta report Wednesday, followed by Amazon and Apple on Thursday. The market's focus will be on whether cloud providers show that AI infrastructure investment is translating into revenue growth, or whether Alphabet's free cash flow miss becomes a broader theme. Lee at Daishin said the KOSPI could fall to 5,800 — the 50% Fibonacci retracement of the April-to-June rally — if earnings fail to lift sentiment.

This article is for informational purposes only and does not constitute investment advice.