Korean Stocks Plunge Nearly 10% in Tech-Led Selloff, Triggering Circuit Breaker

South Korea's stock market suffered a dramatic selloff on Tuesday, June 23, with the KOSPI index plunging 9.99% to close at 8,203.84 points as investors rushed to lock in profits from a prolonged rally in technology and semiconductor stocks. The decline was severe enough to trigger a circuit breaker, halting trading for 20 minutes when the index fell more than 8% from the previous session.

The selloff was led by semiconductor heavyweights SK Hynix and Samsung Electronics. SK Hynix, which had surged nearly 350% year-to-date prior to Tuesday, dropped 12.47%, while Samsung Electronics fell 12.31%. The broader technology rout followed a volatile session on Wall Street, where high-growth stocks faced pressure ahead of quarterly earnings from memory chip maker Micron Technology later in the week.

The downturn rippled across Asia, with Japan's Nikkei losing 3.55%, Taiwan's benchmark falling 1.34%, and Hong Kong's Hang Seng index declining 1.82%. The Singapore Straits Times Index was a rare bright spot, edging up 0.03% to 5,205.74 points, supported by gains in real estate and consumer stocks. Foreign investors sold more than 4 trillion Korean won (approximately S$3.4 billion) of KOSPI-listed shares, while retail investors stepped in as buyers.

Analysts attributed the steep decline to profit-taking after an extraordinary rally that had pushed the KOSPI to repeated record highs in June, despite uncertainties such as the Iran conflict. Ha Seok Keun, chief investment officer at Eugene Asset Management in Seoul, said the selloff appeared to be primarily driven by profit-taking following the recent surge, with markets clearly overbought. He added that rising retail leverage and margin debt likely amplified the downturn.

Allspring Global Investments portfolio manager Tan Song Chao noted that the Korean market has become increasingly sensitive to shifts in retail investor sentiment after such a sustained rally, especially as more traders engage in leveraged trading. Liquidity concerns and derivative positions tend to magnify such volatility, he said.

Investors also grappled with expectations of a more hawkish U.S. Federal Reserve. Federal funds futures now imply a 75% probability of an interest rate hike by September, and both Bank of America Global Research and Deutsche Bank have revised their forecasts to anticipate a rate increase this year, further weighing on sentiment.