SK Hynix drops below W1.7m as Kospi plunges to 6,400 level

The Kospi surrendered all of its intraday gains and tumbled to the 6,400 level Tuesday, as SK Hynix deepened its losses to more than 8% and fell below the 1.7 million won ($1,130) mark. The Kosdaq also plunged more than 6%, triggering a sell-side circuit breaker that temporarily suspended program sell orders.

As of 12:18 p.m. Tuesday, the Kospi was trading at 6,465.97, down 340.96 points, or 5.01%, from the previous session.

The index fell as low as 6,614.70 shortly after the open before rebounding to 6,979.92, but selling pressure resumed and pushed it back down to the 6,400 level during the session. Bargain hunters who emerged in the morning were unable to absorb the volume of sell orders flooding the market.

SK Hynix was trading at 1,685,000 won, down 160,000 won, or 8.67%, from Monday's close. The stock had been changing hands in the upper-to-mid 1.7 million won range in the morning before selling intensified and dragged it below the 1.7 million won threshold.

A sell-side circuit breaker was triggered on the Kosdaq. Korea Exchange said program sell orders on the Kosdaq were suspended for five minutes starting at 12:06:33 p.m. Tuesday.

At the time of the trigger, the Kosdaq 150 futures price stood at 1,306.80, down 84.70 points, or 6.08%, from the previous session's close. The Kosdaq 150 spot index fell 86.69 points, or 6.25%, to 1,298.20.

The Kosdaq sell-side circuit breaker activates when the Kosdaq 150 futures price falls 6% or more from its reference price and the Kosdaq 150 index simultaneously stays at least 3% below the previous session's closing level for one continuous minute.

As of 12:18 p.m., the Kosdaq was at 750.89, down 48.47 points, or 6.06%, from the previous session.

Analysts attributed the renewed risk-off sentiment to a confluence of factors: a resurgence of US-Iran tensions, a sharp rise in global oil prices, and growing wariness over the possibility of further Federal Reserve interest rate hikes. Overnight on Wall Street, the Dow Jones Industrial Average fell 0.26%, while the S&P 500 and the NASDAQ Composite dropped 0.79% and 1.55%, respectively. West Texas Intermediate crude for August delivery surged 9.4%.

The Kospi had already plunged 8.95% on Monday, closing at 6,806.93. The back-to-back selloffs have pushed market volatility to abnormal levels.

"This correction is distinctly abnormal in both its severity and speed," said Han Ji-young, a researcher at Kiwoom Securities. "The market is in a historically extreme oversold condition."

Han added that the forward price-to-earnings ratio had fallen to 5.8 times as of Monday — below the 6.27 times recorded at the trough of the global financial crisis — and that in terms of share prices and valuations, the market had entered a bottom zone.