Kospi tumbles back below 7,000 as SK Hynix ADR shock rattles markets

The Kospi fell back below the 7,000 mark Thursday, dropping more than 5 percent in early trading as weakness in US semiconductor stocks and a sharp overnight decline in SK Hynix's American depositary receipts weighed on the market.

A sell-side sidecar was triggered amid heavy selling by foreign and institutional investors, while markets awaited the Bank of Korea's Monetary Policy Board decision on the benchmark interest rate and earnings results from Taiwan's TSMC.

According to Korea Exchange, the Kospi opened down 323.91 points, or 4.45 percent, at 6,960.50 and extended losses through the session, at one point sliding as low as 6,860.24.

The index had surged more than 6 percent on Wednesday, reclaiming the 7,000 level, only to fall back below it a day later. As of 9:34 a.m., the Kospi was down 398.21 points, or 5.47 percent, at 6,886.20, with losses later widening to more than 6 percent. A sell-side sidecar was also triggered on the main board amid the sharp selloff.

Foreign and institutional investors led the decline. Foreigners posted net selling of 486.8 billion won ($327 million) on the Kospi, while institutions sold a net 278.3 billion won. Retail investors were net buyers of 760.8 billion won. Both groups had been net buyers on Wednesday, reversing course sharply.

Wall Street's three major indexes all rose overnight as softer-than-expected price data eased inflation concerns, but SK Hynix's ADR tumbled, adding downward pressure on the domestic market. The Dow Jones Industrial Average gained 0.29 percent, while the S&P 500 and NASDAQ rose 0.38 percent and 0.62 percent, respectively.

The US Labor Department reported that the producer price index for June fell 0.3 percent from the previous month, below the flat reading analysts had expected, easing inflation concerns. Producer prices, also known as wholesale prices, are widely watched as a leading indicator for consumer prices, as changes in input costs tend to feed through to final goods with a lag.

Federal Reserve Bank of New York President John Williams also helped ease rate-hike concerns, saying in a speech that he expects inflation to have peaked and to decline going forward.

SK Hynix's ADR, however, closed down 9.00 percent at $176.46 per share. The domestic market was under pressure Thursday from the overnight ADR plunge. Foreign selling was concentrated in large-cap semiconductor stocks, dragging the index lower.

The Bank of Korea's Monetary Policy Board meeting also weighed on sentiment. The board raised the benchmark interest rate by 25 basis points to 2.75 percent from 2.50 percent to curb inflation. The move marks the start of monetary tightening for the first time in three and a half years, since January 2023.

Investors were also watching TSMC's earnings, due to be released at around 3 p.m. Korean Standard Time Thursday. The Taiwan chipmaker's results could influence the direction of domestic semiconductor stocks.

Among large-cap stocks, Samsung Electronics tumbled 7.33 percent, falling into the 250,000 won range, while SK Hynix plunged 9.32 percent, slipping below the 2 million won level. Both stocks had surged on Wednesday — Samsung Electronics by 6.27 percent and SK Hynix by 8.83 percent — before reversing sharply.

The Kosdaq also turned lower, opening down 16.11 points, or 1.94 percent, at 813.32 and extending losses. The index had jumped 5.8 percent on Wednesday but gave back those gains a day later. Foreign and institutional investors were net sellers of 96.6 billion won and 6.5 billion won, respectively, while retail investors were net buyers of 102 billion won.