Kospi triggers sell-side sidecar, tumbles nearly 5% to 8,200 in early trade

The Kospi tumbled nearly 5% to the 8,200 level in early trade Friday. The dollar-won rate surpassed 1,540 won in overnight trading, stoking pre-market anxiety, and a selloff in US semiconductor stocks the previous session sent heavy selling cascading into South Korea's large-cap chip names. Foreign investors began net selling more than 700 billion won worth of shares from the opening bell, and a sell-side sidecar was triggered on the main bourse.

Korea Exchange said the sell-side sidecar was activated on the main bourse at 9:08:25 a.m. At that point, the Kospi stood at 8,216.32, down 423.09 points, or 4.90 percent, from the previous session. The KOSPI 200 futures contract also tumbled 71.90 points, or 5.20 percent, to 1,309.50.

A sell-side sidecar is a market stabilization mechanism triggered when a sharp drop in futures prices raises the risk of a sudden flood of program sell orders into the cash market. Once activated, program sell orders are suspended for five minutes.

As of 9:09 a.m., the Kospi was trading at 8,245.95, down 393.46 points from the previous session. At its early intraday low, the index had fallen as much as 4.91 percent, approaching the 5 percent threshold.

Foreign investors are driving the decline. As of the same time, foreigners had net sold 713.7 billion won worth of shares on the main bourse. Retail investors absorbed 523.6 billion won and institutional investors 147.4 billion won in net purchases, partially offsetting the foreign selling.

Domestic semiconductor stocks came under pressure following weakness in US chip shares the previous session. Broadcom tumbled more than 12 percent in New York on Thursday after disappointing earnings, while the Philadelphia Semiconductor Index fell more than 2 percent. Valuation concerns are now coming to the fore for stocks that had surged on AI chip optimism, focusing selling pressure on related large-cap names in the domestic market.

Most of the top market-capitalization stocks are in the red. Market bellwether Samsung Electronics is trading down 5.69 percent at 331,500 won, while SK Hynix has fallen 7.18 percent to 2,133,000 won. Samsung Electronics preferred shares are also down 4.77 percent.

Semiconductor and holding company stocks are among the steepest decliners. SK Square has fallen 7.49 percent, and Samsung C&T has tumbled 12.34 percent. Samsung Life is down 5.48 percent. Hyundai Motor is off 3.71 percent, Samsung Electro-Mechanics 2.39 percent, and LG Energy Solution 1.07 percent. HD Hyundai Heavy is the sole gainer among the top 10 market-cap stocks, rising 3.69 percent.

The Kosdaq is also falling in tandem. As of 9:09 a.m., the index was down 27.77 points at 1,021.96. Foreign investors net sold 31.1 billion won on the Kosdaq, while retail investors net bought 26.4 billion won and institutions 5.6 billion won. Other investors net sold approximately 1 billion won.