KOSPI plunges 4.5% to 6,516 as global semiconductor rout deepens

South Korea's KOSPI crashed through the 6,500 support after a holiday gap exposed the index to a two-day global semiconductor selloff.

The KOSPI tumbled 4.46% to 6,516.27, breaching the 6,500 support after a holiday gap exposed it to a global chip rout. The index touched an intraday low of 6,472, bringing its two-day cumulative decline to more than 10%.

"Discussion of the semiconductor cycle having peaked is still premature," said an analyst at NH Investment Securities during a media briefing on July 20. The firm pegged a fair-value bottom for the KOSPI at around 6,000, based on a 1.3-to-1.4 times price-to-book ratio.

The index opened 2.60% lower at 6,643.58 and extended losses through the session. Foreign and retail investors combined net bought more than 200 billion won, providing a partial floor, while financial institutions net sold 2.96 trillion won — the dominant source of selling pressure. Samsung Electronics Co. and SK Hynix Inc. accounted for the bulk of the index drag, with both stocks extending declines from the pre-holiday session. The KOSPI's 12-month forward price-to-earnings ratio has compressed to 5.81 times, near historical lows, according to Daishin Securities.

Goldman Sachs identified 6,500 as the next support after 6,800 gave way, with a further floor at 6,100 to 6,000. All eyes now turn to US Big Tech earnings starting July 23, when Alphabet Inc. and Intel Corp. results will test whether AI-driven demand can reverse the de-leveraging cycle in semiconductor stocks.

The selloff was triggered by a two-session rout in global chip stocks while Korean markets were closed July 17 for Constitution Day. The Philadelphia Semiconductor Index fell 5.85% over the July 16-17 period, with an intraday drawdown as deep as 9.71%. Taiwan Semiconductor Manufacturing Co. dropped 7.29% on July 17 alone, while Kioxia Holdings Corp. plunged 16.10%. The weakness followed a broader rotation out of technology shares on Wall Street, where the S&P 500 and Nasdaq Composite both declined as traders reassessed elevated valuations in the AI trade.

Samsung Electronics and SK Hynix — the two heaviest weights on the KOSPI — had already absorbed some of the adjustment before the holiday, with the index falling 6.37% on July 16. Even so, the catch-up move proved severe.

Position-Driven Selloff, Not a Fundamental Reckoning

Analysts characterized the selloff as position-driven rather than a fundamental deterioration in the semiconductor cycle. The core tension, they said, is that semiconductor earnings growth rates are mathematically unsustainable — Micron Technology Inc. posted a 15-fold net profit increase last quarter, and Samsung Electronics' operating profit surged 17-fold year over year. The industry is transitioning from a price-increase cycle to a volume-driven model, and valuations will need to reprice once sustainable profitability is confirmed.

DS Investment Securities pushed back against oversupply fears, noting that new fabrication capacity — including Samsung's plant in Xian, China — will not materially impact supply until after 2035. The DRAM market is expected to remain in severe undersupply through 2026 and 2027, with another supply gap emerging in 2031.

The selloff extended across Asia. Japan's Nikkei 225 slid as SoftBank Group Corp., Tokyo Electron Ltd. and Kioxia shares sank on July 19, tracking the same semiconductor-led weakness. The won weakened past 1,380 against the dollar, compounding pressure on foreign-investor returns in dollar terms.

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