Kospi tumbles below 6,000 as foreign panic selling batters semiconductor stocks

South Korean stocks tumbled Tuesday as concerns over China's semiconductor supply expansion collided with mounting doubts about the AI investment cycle. A wave of foreign selling concentrated in semiconductor shares dragged the Kospi below the 6,000 mark, while the Kosdaq shed more than 8 percent, falling below the 700 level for the first time in about 15 months.

The Kospi stood at 5,999.88 as of 3:11 p.m., down 755.87 points, or 11.19 percent, from the previous session, according to Korea Exchange.

Sell orders flooded the market from the opening bell, triggering a series of stabilization mechanisms. At around 9:06 a.m., a sell-side sidecar was activated on the KOSPI market after KOSPI 200 futures prices fell more than 5 percent below their reference price for one consecutive minute.

At 10:13:43 a.m., the Kospi dropped 8.02 percent from the previous session to 6,213.51, triggering a Level 1 circuit breaker that halted trading on the KOSPI market for 20 minutes.

Foreign investors dominated the selling, posting net sales of 4.49 trillion won ($3.06 billion) on the KOSPI market, pulling the index lower. Retail investors countered with net purchases of 3.61 trillion won, while institutions bought a net 901.4 billion won.

Every sector fell. Electrical and electronics led the decline at minus 13.22 percent, followed by medical and precision equipment (minus 11.22 percent), construction (minus 10.00 percent), machinery and equipment (minus 9.89 percent), telecommunications (minus 9.74 percent), retail (minus 8.74 percent) and financials (minus 8.52 percent).

Large-cap stocks were hit across the board. Samsung Electronics fell 13.4 percent to 219,750 won, while SK Hynix dropped 14.3 percent to 1.55 million won. Samsung Electronics preferred shares (minus 12.29 percent), SK Square (minus 15.33 percent), Samsung Electro-Mechanics (minus 16.75 percent), Hyundai Motor (minus 10.30 percent), LG Energy Solution (minus 6.46 percent) and Samsung Biologics (minus 0.32 percent) also declined.

The Kosdaq was trading at 700.99 at the same time, down 63.89 points, or 8.35 percent, from the previous session. The index slid as low as 697.45 intraday, breaching the 700 level before paring some losses. The last time the Kosdaq fell below 700 during a session was April 16 last year, making Tuesday's drop the first such breach in about 15 months.

A sell-side sidecar was also triggered on the Kosdaq market at around 9:14 a.m. At 12:01 p.m., a Level 1 circuit breaker halted Kosdaq trading for 20 minutes after the index remained down more than 8 percent.

On the Kosdaq, retail investors and foreign investors posted net purchases of 104.3 billion won and 35.6 billion won, respectively. Institutions were net sellers of 136.8 billion won.

Among top Kosdaq-listed stocks by market capitalization, Alteogen fell 6.25 percent, Ecopro BM dropped 8.78 percent, Ecopro declined 10.30 percent, Rainbow Robotics shed 9.87 percent, Jusung Engineering lost 13.14 percent, Leeno Industrial fell 11.89 percent, Wonik IPS tumbled 15.09 percent and HLB slipped 4.55 percent. PharmaResearch bucked the trend, rising 2.97 percent.

Market analysts said investor sentiment froze rapidly, particularly in the semiconductor sector, as worries about China's potential semiconductor supply expansion compounded doubts about the sustainability of the AI investment cycle.

"News that a Chinese company is producing immersion deep ultraviolet lithography equipment has raised concerns that bottlenecks constraining Chinese memory chipmakers' capacity expansion could ease," said Lee Gyeong-min, an analyst at Daishin Securities. "Even if China cannot close the technology gap in the short term, wariness has grown that an expansion of Chinese memory supply could erode the supplier-favorable structure that has defined the memory chip market."

Lee added that reports of Nvidia providing $250 billion in financial guarantees related to OpenAI's data center investment had also shaken confidence in the AI investment cycle. He said concerns were spreading that the scale of AI investment may be driven by excessive expectations rather than actual end demand, and that risk aversion had broadened beyond semiconductors to engulf the entire market.