Kospi Drops More Than 5%, Slips Back Below 7,000 as Samsung, SK Hynix Slide

South Korea’s Kospi dropped more than 5% in early trading on July 16, falling back below the 7,000 level and triggering a temporary halt on program sell orders known as a sidecar. The Korea Exchange said it activated a sell-side sidecar in the Kospi market at 9:10:26 a.m. on July 16. It was the third trading day since the previous sell-side sidecar on July 13 and the 37th such activation in the Kospi market this year.

The exchange suspends program buy or sell orders for five minutes when the most actively traded Kospi 200 futures contract rises or falls more than 5% from the previous session’s close and stays at that level for one minute. When the sell-side sidecar was triggered, Kospi 200 futures were down 5.22% from the prior close at 1,104.40.

In the benchmark stock market, foreign and institutional investors were net sellers of 98.3 billion won and 108.4 billion won, respectively. Retail investors were the only net buyers, purchasing a net 212.2 billion won. Samsung Electronics and SK Hynix, the two biggest companies by market value, also traded lower. As of 9:35 a.m., Samsung Electronics was down 7.51% from the previous session at 258,500 won, while SK Hynix had fallen 10.04% to 1.873 million won.

Other decliners included SK Square, down 11.36%, Samsung Electro-Mechanics, down 9.34%, Hyundai Motor, down 1.50%, and Samsung Life Insurance, down 2.67%. Gainers included LG Energy Solution, up 2.99%, KB Financial Group, up 1.16%, and Samsung Biologics, up 0.51%. At the same time, the Kosdaq fell 19.70 points, or 2.38%, to 809.73.

The sharp early decline was driven by renewed concern over the staying power of spending on artificial intelligence infrastructure. Morgan Stanley said in a report that cancellations and delays in data-center projects were increasing because of higher electricity rates and environmental costs. That made long-standing worries over AI infrastructure investment more concrete and further hurt investor sentiment.

Overnight, the three major U.S. stock indexes all closed higher as wholesale inflation slowed and large technology stocks advanced. The Dow Jones Industrial Average rose 150.37 points, or 0.29%, to 52,658.64. The S&P 500 gained 28.81 points, or 0.38%, to 7,572.40, while the tech-heavy Nasdaq Composite added 162.22 points, or 0.62%, to 26,269.23.

Still, South Korean stocks came under pressure as investors in New York rotated out of semiconductor shares and into megacap technology stocks. Micron Technology fell 8.02%, while Intel dropped 4.43% and AMD lost 3.46%. The VanEck Semiconductor ETF declined 1.6%. SK Hynix American depositary receipts also fell 9.00% to close at $176.46 a share.

Kim Yu-mi, an analyst at Kiwoom Securities, said domestic stocks were retracing part of the previous session’s semiconductor-led gains after chip shares fell in New York. She added that profit-taking had emerged in AI and semiconductor stocks that had recently surged, while buying was rotating into large platform companies such as Apple, Alphabet and Amazon.

Kang Kyung-ju, Hankyung.com reporter qurasoha@hankyung.com