KOSPI Plunges 5.46%, Nearly Triple Japan and Taiwan's Losses

A screen at Hana Bank’s headquarters dealing room in Jung-gu, Seoul, displays the KOSPI, KOSDAQ and won-dollar exchange rate on Oct. 14, as the KOSPI opened less than 1% higher following the previous day’s sharp plunge. South Korea's benchmark KOSPI experienced extreme volatility as massive foreign selling briefly pushed the index below the 6,000 mark. Although uncertainty surrounding the global semiconductor industry weighed on Asian equity markets, South Korea's memory chip-heavy market suffered significantly steeper losses than neighboring Japan and Taiwan. According to the Korea Exchange on Oct. 14, the KOSPI closed the previous session down 348.89 points, or 5.46%, at 6,035.35. By comparison, Taiwan's TAIEX fell 1.95% and Japan's Nikkei 225 declined 1.82%, meaning the KOSPI's percentage loss was nearly three times as large. The index briefly plunged more than 7% to an intraday low of 5,911.11, triggering a sell-side sidecar that temporarily suspended program sell orders. A key factor behind South Korea's vulnerability was the heavy concentration of market capitalization in Samsung Electronics and SK hynix. As of Oct. 12, the two companies accounted for a combined 50.06% of the KOSPI's total market capitalization. With roughly half the market concentrated in two semiconductor giants, concerns over developments such as Chinese memory chipmaker ChangXin Memory Technologies' (CXMT) plans to introduce new server memory products had an outsized impact on the broader index. Samsung Electronics plunged 7.39%, while SK hynix tumbled 10.09%, leading the market lower. Differences in industrial composition also amplified the decline. Taiwan's leading semiconductor company, TSMC, focuses primarily on foundry services, or contract chip manufacturing, which are generally less directly exposed to memory chip supply-demand cycles. South Korean chipmakers, by contrast, are heavily concentrated in memory semiconductors, making them particularly sensitive to concerns over slowing artificial intelligence (AI) investment and potential oversupply. Japan's market also benefited from buying interest in other sectors, including shipping, financials and steel, which helped cushion losses in semiconductor stocks. In South Korea, however, selling pressure was heavily concentrated in the electrical and electronics sector. The imbalance in market flows further intensified the downturn. Foreign investors sold a net 4.53 trillion won, or approximately $3.38 billion, worth of stocks on the KOSPI market on Oct. 13, with approximately 95%, or 4.3 trillion won, concentrated in the electrical and electronics sector. Meanwhile, corporate share buyback programs that had previously helped support stock prices have largely concluded. Samsung Electronics completed its 15 trillion won buyback program on Oct. 6, ahead of its original schedule, while SK hynix was also approaching the end of its repurchase program, weakening an important source of buying support. Analysts attributed the sharp decline primarily to an imbalance between buying and selling pressure, compounded by deteriorating investor sentiment, rather than a fundamental deterioration in the semiconductor industry. Lee Sang-joon, an analyst at NH Investment & Securities, said that although concerns remain over Chinese companies' technological advances, narrowing the gap with established industry leaders would be difficult in the short term. He argued that interpreting the latest developments as evidence of deteriorating industry fundamentals would be excessive. Lee Jae-won, an analyst at Yuanta Securities, also raised the possibility of a technical rebound, noting that the market had entered oversold territory. Looking ahead, market direction is expected to depend heavily on earnings announcements from major technology companies later this month and upcoming U.S. economic data. Changes in foreign investor flows and potential upward revisions to semiconductor earnings estimates for 2027 will be key indicators of a sustained recovery. Kim Seok-hwan, an analyst at Mirae Asset Securities, said a meaningful recovery would require foreign selling pressure to ease, alongside a reduction in interest rate-related concerns.