- Asian tech stocks faced profit-taking, with South Korea's Kospi index plunging 6.4% intraday from a historic high, triggering the sidecar trading halt mechanism.
- Foreign investors withdrew over 2 trillion won (approximately $1.3 billion) from the South Korean stock market during the morning trading session, while retail investors stepped in to buy.
- The semiconductor giants were hit hard, with SK Hynix dropping 8.2% intraday and Samsung Electronics falling 6.9%. The market's focus has shifted to Micron Technology's (MU:US) earnings report, which is set to be released this week.
Semiconductor Giants Trigger Circuit Breaker
On Tuesday, the Kospi index experienced a valuation correction, dragged down by heavyweight chip stocks. Investors took profits from the recent rally driven by the artificial intelligence (AI) boom, causing the Kospi to plunge 6.4% intraday and triggering the Korea Exchange's (KRX) sidecar trading halt mechanism. Prior to this adjustment, the index had benefited from AI hardware investment demand, surpassing the 9,000-point mark for the first time in history. Amid a phase of global tech stock revaluation, SK Hynix (000660:KS), which had risen for eight consecutive trading days, plummeted 8.2% intraday, while Samsung Electronics (005930:KS), which had just lost its top market cap position the previous day, also fell 6.9%.
Massive Foreign Withdrawals and Amplified Leverage Risks
High-frequency data from the exchange showed a strong exit intention from foreign investors during the morning session, with net sales of Kospi stocks exceeding 2 trillion won, equivalent to about $1.3 billion. In stark contrast to the concentrated withdrawals by foreign investors, local retail funds in South Korea continued to enter the market. Ha Seok Keun, Chief Investment Officer at Eugene Asset Management in Seoul, noted that due to retail investors' leveraged operations and margin balances at historical highs, the market's sensitivity to any marginal negative news in the overbought zone has significantly increased, with high leverage amplifying intraday volatility. Additionally, the recent surge in leveraged ETF products tracking the two semiconductor giants has drawn significant regulatory attention. Lee Chan-jin, head of the Financial Supervisory Service (FSS) in South Korea, stated on Monday that authorities are evaluating market stabilization measures to mitigate the microstructural impact of volatile leveraged derivatives on the main board market.
Micron's Earnings as a Key Industry Validation
Lee Jae Mahn, a strategist at Hana Securities in Seoul, believes that SK Hynix's previous valuation surpassing Samsung Electronics was itself a sign of overheated market sentiment. For the Kospi index to establish further upward momentum, it needs to wait for Samsung Electronics' actual earnings performance in the second quarter to catch up with SK Hynix. Currently, the pricing anchor for the entire East Asian semiconductor supply chain has shifted to Micron Technology's earnings report, which is set to be released this week. Market analysts point out that Micron's performance and forward guidance will be a substantial litmus test for whether AI hardware capital expenditure has sustainable growth potential. If Micron's data exceeds expectations, the fundamental support for South Korea's semiconductor giants will be reaffirmed; if the data falls short, the valuation pressure phase for the Asia-Pacific semiconductor supply chain may be prolonged.
Asia-Pacific Major Equity Markets Under Pressure
Affected by the weakening of major tech stocks like SpaceX (SPCX:US) in the U.S. for three consecutive trading days, sentiment in major Asian markets was generally suppressed on Tuesday. Besides South Korea leading the decline, Japan's Nikkei 225 index fell 1.1%, and the TOPIX index dropped 0.8%, both retreating from the historic highs set earlier this week. Taiwan's weighted index also recorded a 0.44% decline before the deadline. Chinese assets showed mixed performance, with the CSI 300 index down 1%, while the Shanghai Composite Index fluctuated around the flat line, reflecting a tug-of-war between expectations for domestic fiscal and monetary stimulus policies and concerns over a global demand slowdown.
