South Korea’s KOSPI index plummeted 10.8% on July 28, marking its steepest drop since early March. Samsung Electronics and SK Hynix, which together make up over half the index, led the decline with losses surpassing 13% and 14%, respectively. This sharp pullback wiped out months of gains fueled by optimism around AI-driven semiconductor growth.
The selloff unfolded after China’s ChangXin Memory Technologies debuted on the Shanghai STAR Market, with shares surging nearly 470% off the IPO price. This meteoric rise sparked concerns about increased chip supply, prompting Korean investors to exit leveraged positions ahead of second-quarter earnings from local chipmakers. Trading was so volatile that circuit breakers halted KOSPI trading multiple times during the day.
AI Boom Meets Reality Check
Samsung and SK Hynix had ridden the wave of AI investment, pushing the KOSPI to record highs near 9,115 in June. However, the success of CXMT’s IPO shifted sentiment. Investors grew wary of oversupply risks in memory chips, a threat that had been looming but overlooked amid surging AI demand. Forced margin calls accelerated selling, driving prices down rapidly.
South Korea hosts one of the world's most active retail crypto scenes. With their equity portfolios hit hard, local investors may hesitate to turn toward cryptocurrencies like Bitcoin or altcoins anytime soon.
This material is for informational purposes only and does not constitute financial advice.
