South Korea's benchmark KOSPI index tumbled more than 4% on July 20, its first trading day after a holiday, closing at 6,498 points after briefly touching that low. The drop pushed the index more than 25% below its June peak, officially entering a technical bear market.
Chip stocks lead the rout
Semiconductor heavyweights Samsung Electronics and SK Hynix both opened more than 5% lower before foreign investors stepped in to buy. The sell-off was fueled by jitters in the chip sector and escalating tensions between the US and Iran. While Korean markets were closed for the holiday last Friday, the Philadelphia Semiconductor Index had already shed 4.3%, setting the stage for Monday's drop.
Rising competition from Chinese AI models added further pressure on the memory chip trade, which has been a key driver of the KOSPI's earlier rally. Han Ji-young, a researcher at Kiwoom Securities, noted that leading stocks like Samsung Electronics, SK Hynix, and Samsung Electro-Mechanics have fallen 30–40% from their peaks, amplifying the sense of decline.
Foreign investors buy, retail sells
Despite the broad sell-off, foreign investors net bought 278.4 billion won ($187.1 million) in early trading, concentrating their purchases in electronics stocks. Retail investors, by contrast, net sold 300.8 billion won over the same window, suggesting a divergence in sentiment between institutional and individual traders.
Won weakens, oil climbs, BOK raises rates
The won-dollar exchange rate opened at 1,488.3, extending its recent slide as oil prices climbed on fears of a disruption in the Strait of Hormuz. The Bank of Korea raised interest rates for the first time since 2023, adding to import-price pressure and further weighing on the currency.
Analysts are now looking to upcoming US hyperscaler earnings as the next catalyst for chip stocks. Alphabet reports on July 22, followed by Microsoft, Meta, and Amazon. Their outlooks on AI-related spending and demand for memory chips could determine whether the KOSPI finds a floor or slides further.
