Middle East Tensions Trigger South Korean Stock Rout and Circuit Breaker as AI Chip Shares, Bitcoin Slide

South Korea’s equity market is heavily influenced by Samsung Electronics and SK Hynix, making the semiconductor cycle and foreign investor sentiment central to the KOSPI’s direction. Moody’s said second-quarter economic growth may slow, adding to concerns over the broader outlook. Still, AI-driven semiconductor exports remain a key source of support for the trade-dependent economy and a potential counterweight to weaker domestic momentum.

The KOSPI plunged 5% on July 20 as Samsung Electronics and SK Hynix led declines. Morgan Stanley cut its bearish-case target to 6,000 points, while Citi and Goldman Sachs also issued cautious assessments the same day. The selloff contrasted with longer-term industry optimism: SK Hynix’s chairman forecast that global demand for AI chips will surge 60% to 100% next year.

South Korean semiconductor heavyweights had posted substantial gains on demand for AI servers and high-bandwidth memory, or HBM. As their shares corrected sharply from their peaks, profit-taking by foreign investors and stop-loss selling on leveraged retail long positions amplified each other. That also put liquidity pressure on the tech-heavy KOSPI.

The latest bout of selling sent the KOSPI plunging 10% intraday, hitting the Korea Exchange’s trading-halt threshold and triggering a circuit breaker. Reports did not disclose the exact date of the event or the value of foreign investors’ net sales. The decline also spilled into Taiwan’s stock market, where memory-chip bellwether Nanya Technology was driven down to its daily limit by sell orders, reflecting a rapid deterioration in risk appetite across Asia’s semiconductor supply chain.