Key Takeaways:
South Korea's KOSPI triggered a circuit breaker and Taiwan's TAIEX fell 2.9% as a semiconductor rout swept across Asia.
South Korea's KOSPI plunged 5.1% to 5,714, triggering a circuit breaker, after Iran's missile attack and SK Hynix's earnings miss sparked a chip rout.
"Large daily fluctuations are mostly divorced from market fundamentals," Eurasia Group analysts wrote in a note Tuesday. While corporate profits remain at record highs, institutional and foreign investors have increasingly taken profits as more retail investors entered the market, they added.
The selloff swept across the region's semiconductor complex. Taiwan's TAIEX fell 2.9% to 40,417, with United Microelectronics Corp. dropping 9.3% and MediaTek Inc. sliding 8%. Japan's Nikkei 225 declined 1.4% to 61,499, led by a 17.1% plunge in SCREEN Holdings Co. and a 10.9% drop in memory maker Kioxia Holdings Corp. South Korea's KOSPI has now retreated about 39% from its June record peak.
The divergence between the chip rout and record highs in Singapore and New Zealand suggests capital rotation within the region, but the scale of the semiconductor selloff raises questions about whether the AI-driven memory cycle is peaking. Jefferies warned that memory chip price growth may slow to 15% to 20% in the third quarter.
Record profit, record disappointment
SK Hynix Inc., the world's second-largest memory chipmaker, fell 7.6% to KRW 1.428 million after reporting a record second-quarter operating profit of KRW 60.54 trillion that still missed the KRW 64 trillion consensus estimate. Revenue surged 257% to KRW 79.3 trillion and net profit jumped 1,242% to KRW 93.9 trillion — all quarterly records — but the bar had been set too high by the AI frenzy. The stock has now lost 52.2% from its all-time high of KRW 2.987 million.
"The earnings miss had largely been anticipated and reflected product mix rather than weakening demand," said SK Kim, senior analyst at Daiwa Capital Market. "Fundamentally, there's no change in the AI-driven supercycle."
The selloff extended beyond memory chips. Samsung Electronics Co. fell 2.7%, while MLCC makers Taiyo Yuden Co. and Murata Manufacturing Co. dropped 11.5% to 13.9% in Tokyo. In Taipei, Nanya Technology Corp. hit the daily limit down and Winbond Electronics Corp. fell 9.7%. China's GIGADEVICE Semiconductor Co. also hit the limit down, falling 10%.
Geopolitical shock compounds tech rout
The rout was compounded by a sharp escalation in Middle East tensions after Iran launched ballistic missiles at US forces, sending international oil prices up more than 4%. The geopolitical shock added to an already fragile risk appetite in a region where semiconductor stocks had tripled from the start of 2025 to mid-June before beginning their retreat.
The KOSPI's 5.1% drop triggered a five-minute halt in program trading after KOSPI200 futures fell 5%, the first such circuit breaker event since the pandemic-era volatility of 2020. The benchmark index has now erased roughly 39% from its June peak, putting it in bear market territory.
Diverging markets
Not all Asian markets joined the selloff. Singapore's Straits Times Index hit a record intraday high of 5,640, last trading at 5,632. New Zealand's NZX 50 also set a record at 13,991. Australia's ASX 200 rose 1.3%, while the Philippines' PSEI gained 1.9%. Hong Kong's Hang Seng Index bucked the regional trend, rising 1.7% to 25,730, supported by a rebound in Chinese tech names.
The divergence highlights a capital rotation out of overheated semiconductor plays into markets that had lagged the AI rally. Singapore and New Zealand, with heavier exposure to financials, real estate, and consumer staples, have benefited as investors seek alternatives to the tech-heavy markets of Korea, Taiwan, and Japan.
This article is for informational purposes only and does not constitute investment advice.
