South Korea’s stock exchange triggered a temporary trading halt on Thursday after the benchmark KOSPI index plunged more than 5%, as a technology-led sell-off on Wall Street and persistent US inflation fuelled concerns over higher interest rates.
The sell-side “sidecar” mechanism was activated after sharp losses in index futures. It automatically suspends programme sell orders for five minutes to cool sudden market swings.
The trigger came as the KOSPI extended its losing streak to seven sessions, its longest since September 2024. The index was down 7.49%, or 450.02 points, at 5,558.79 as of 7:05 am.
The sell-off was led by major technology stocks, with Samsung Electronics falling 9.05% and SK Hynix plunging 11.06%. The sharp decline in chipmakers weighed on the broader market as investors reacted to developments in the US and reassessed their exposure to technology stocks.
The immediate trigger was a steep fall in index futures, which activated the exchange’s automatic circuit-breaker mechanism for programme sell orders.
A sidecar is designed to temporarily slow automated selling when futures prices move sharply. It does not shut the entire stock market, but pauses programme sell orders for five minutes to help contain volatility.
The mechanism was triggered as investors reacted to a tech-led sell-off on Wall Street. Sticky US inflation data fuelled expectations that interest rates could remain higher for longer, putting pressure on technology stocks and other rate-sensitive assets.
Higher interest rates can weigh on technology shares by raising the cost of capital and reducing the present value investors assign to future earnings. The prospect of tighter monetary policy also tends to make investors more cautious about expensive growth stocks.
The sharp fall in South Korea’s heavyweight chipmakers was a major factor behind the market rout.
SK Hynix shares plunged 11.06%, while Samsung Electronics fell 9.05%. The declines came amid the broader technology sell-off, as US inflation data strengthened bets on further interest-rate hikes.
The market was also struggling to find fresh buyers after share buybacks at Samsung Electronics and SK Hynix had run their course, Mixo Das told news agency Reuters, head of Korea equity strategy at JP Morgan in Hong Kong.
“The market is struggling to find a new buyer” after the buybacks had run their course, Das said.
However, he said the most volatile phase of the process could be behind the market and maintained a positive longer-term view on artificial intelligence-related stocks.
“On a six- to 12-month basis, we still think that all of these AI stocks will be substantially higher than where they currently stand,” he said.
The weakness extended beyond chipmakers. LG Energy Solution fell 3.44%, while Hyundai Motor declined 3.99% and Kia Corp dropped 2.03%.
Of the 889 stocks traded, 768 declined and only 90 advanced, highlighting the broad-based nature of the selling. Foreign investors were net sellers of shares worth 355.6 billion won.
South Korea’s currency strengthened against the US dollar despite the equity market rout. The won was quoted at 1,339.5 per dollar, up 0.21% from its previous close of 1,342.3.
Government bond yields also edged lower. The three-year Korean Treasury bond yield fell 3 basis points to 3.855%, while the 10-year yield declined 2.1 basis points to 4.224%.
The divergence between falling equities and lower bond yields reflects differing market reactions across asset classes as investors assessed the implications of US inflation and the interest-rate outlook.