South Korea's KOSPI Tumbles Over 4% as Semiconductor Sell-Off Deepens

South Korea’s benchmark KOSPI index plunged more than 4% on Monday, as a sharp sell-off in major semiconductor stocks extended the market's severe losses from July, its worst monthly performance since the 2008 global financial crisis.

Chip Giants Lead Market Decline

The decline was driven by technology heavyweights, which erased much of the relief rally seen at the end of last week. Samsung Electronics Co Ltd (KS:005930) fell approximately 8%, while SK Hynix Inc (KS:000660) lost more than 7%.

These two memory-chip manufacturers collectively account for over half of the KOSPI's total market weighting, making the index highly susceptible to shifts in sentiment toward the semiconductor sector. The sell-off occurred despite both companies reporting strong quarterly earnings last week, suggesting investor focus has shifted from recent performance to future growth concerns.

Unwinding the Crowded AI Trade

Monday's drop follows a brutal July in which the KOSPI plummeted 22%. The correction has been attributed to concerns that the popular artificial intelligence trade had become overextended and that valuations were too high.

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Investor sentiment soured amid worries about slowing spending from major data-center operators and the unwinding of heavily crowded retail positions. During July, Samsung shares fell 21% and SK Hynix slumped 35%, even as both stocks remain well above their levels from a year ago.

Market Volatility and Regulatory Scrutiny

The recent market turbulence has been extreme, triggering a record four circuit-breaker trading halts on the KOSPI during July. The volatility followed a massive influx of retail capital, with local market estimates suggesting investors poured approximately 78 trillion won ($54.2 billion) into KOSPI shares during May and June.

In response to the speculation, South Korean authorities temporarily halted the listing of new single-stock leveraged exchange-traded funds (ETFs) in mid-July and have pledged additional measures to stabilize the market. Despite the recent correction, the KOSPI remains one of the world's best-performing major equity benchmarks in 2026.