KOSPI plunges 8.4% as chip selloff, margin debt bite

South Korea’s KOSPI fell 8.4% on Monday, triggering a Level 1 circuit breaker at 7,477. Trading was halted shortly after the open as Samsung Electronics and SK Hynix each dropped about 10%. The won weakened toward 1,554 per dollar and margin trading reached roughly 38 trillion won.

The drop followed a global selloff in semiconductor stocks after Broadcom’s guidance for AI-chip revenue came in about $1.2 billion below expectations. The Philadelphia Semiconductor Index fell 10.26% on Friday and the Nasdaq Composite dropped 4.18%.

Stronger-than-expected U.S. non-farm payrolls renewed concern that the Federal Reserve may keep policy tighter for longer. The 10-year Treasury yield rose above 4.5%, putting pressure on long-duration growth shares, including many chip names.

Domestic market mechanics amplified the decline. Margin debt in South Korea rose to a record near 38 trillion won and newly launched single-stock 2x leveraged ETFs tied to Samsung and SK Hynix raised the risk of forced selling. Samsung and SK Hynix together represent more than half of the KOSPI’s market value and account for about 70% of the index’s year-to-date gains after the index had climbed more than 90% earlier this year.

Lee Kyung-min of Daishin Securities warned, “With Samsung and SK Hynix making up about half the market, short-term volatility becomes inevitable when leading stocks enter a phase of cooling after an overheated rally.”

Market participants noted Nvidia announced partnerships with SK Hynix and Naver a day earlier, but those deals did not stop panic selling across semiconductor names. Broadcom’s guidance was below very high expectations, though the company still pointed to strong year-on-year growth in AI-chip revenue.

Goldman Sachs continues to hold a 12-month KOSPI target of 12,000, citing expectations that Korea’s semiconductor cycle and corporate earnings will support higher levels. Han Ji-young of Kiwoom Securities stated, “The semiconductor-led KOSPI earnings momentum and low valuation burden remain intact.”

Traders and regulators will monitor whether circuit breakers and heavy losses lead to further selling or whether buyers return after the rapid decline. Liquidity concerns tied to large capital calls for upcoming mega listings were also cited as an additional strain on the market.