South Korea's KOSPI Index experienced its eighth circuit breaker activation of 2026 on Tuesday, with trading halted for 20 minutes after the benchmark fell 10.84% to 6,023.66. The Level 1 circuit breaker took effect at 10:13 a.m. local time after the decline remained above 8% for one minute, marking the 14th circuit breaker activation in the index's history. The selling was so severe that it triggered both a temporary sidecar and a full circuit breaker, making it one of the biggest one-day selloffs in the market this year. The circuit breaker mechanism suspended trading and order-taking in shares on the main KOSPI market for 20 minutes, followed by a 10-minute single-price call auction to reopen trading. This latest decline extends a period of unusually sharp moves in South Korean equities, with KOSPI volatility in June intensified by margin calls, high retail leverage and the heavy index weight of Samsung Electronics and SK Hynix.
Memory chip manufacturer SK Hynix plunged 14.7% after its American depositary receipts (ADRs) fell to an all-time low in New York and dropped below their original US listing price. Samsung Electronics, another heavyweight constituent of the index, declined 14.4%, marking its sharpest single-day fall since October 2008. The selling was not limited to chip companies, with Hyundai falling around 8.2% and LG dropping about 5.1%. The pressure also spread to other Asian markets, with Japan's Nikkei 225 falling as much as 4.4% (later reported down 3.9% near close), while the broader Topix index fell about 2.5%. Japanese companies linked to the memory-chip and chip equipment supply chain saw heavy losses, with Kioxia, Tokyo Electron and Advantest falling between about 8% and 16.5%. In China, the CSI 300 index was down around 2.5%, as reported by The Financial Express. The timing of the selloff has made investors more nervous, as SK Hynix is set to announce its quarterly results on July 29, just a day after the sharp market fall.
Another major concern for investors is China's growing chip industry, with the blockbuster stock market debut of ChangXin Memory Technologies (CXMT), China's biggest memory-chip maker, raising fears that the company could use the fresh money to expand faster and narrow the gap with South Korea's Samsung Electronics and SK Hynix. Investors are also paying attention to reports that China has developed its own deep ultraviolet lithography equipment, with details about the equipment's performance and commercial timeline not yet disclosed, so the competitive threat remains uncertain. "The market's concern lies less in CXMT's current earnings and more in its potential for accelerated capacity expansion to rival Korean companies and technology development following its IPO," said Kim Seok-hwan, a Seoul-based market analyst at Mirae Asset Securities. The two chipmakers together account for more than half of the KOSPI's weighting, amplifying the impact of the sector-wide selloff on the broader market.
The global semiconductor selloff intensified after Nvidia shares shed 5% overnight following reports from the Wall Street Journal that the company is in talks to provide roughly $250 billion in financing guarantees for OpenAI as part of a massive data centre project. US semiconductor stocks had already suffered a broad selloff on Monday, with the VanEck Semiconductor ETF falling more than 2%, while AMD and Teradyne were among the biggest losers. The selling came as investors became more cautious about whether the huge amount of money being spent on AI infrastructure and technology can continue at the same pace. The concerns have grown following Nvidia's recent decline, leading to debate that some AI-linked chip stocks may have become too expensive after their strong gains. "Greed has turned into fear for AI-related semiconductor stocks," said Vey-Sern Ling, managing director at Union Bancaire Privee. "Investors are now interpreting every piece of news negatively and using it as an excuse to sell, rather than critically analyzing the true fundamental impact."
South Korea's Financial Services Commission is accelerating restrictions on single-stock leveraged exchange-traded products, with retail investors now required to hold at least 30 million won in cash to make new or additional purchases from July 31. The previous 10 million won requirement allowed some securities to count towards the minimum, while the FSC has already suspended new listings and advertising for single-stock leveraged products. Further changes covering premium controls and watchlist rules are scheduled for August 19, with the regulator saying it would continue monitoring demand and consider more measures if volatility remains elevated. The next confirmed events include SK Hynix's earnings, the additional share listing and the July 31 leverage restrictions, with investors also watching whether the KOSPI recovers after the halt and whether SK Hynix's ADR can reclaim its $149 offering price. South Korea's top financial regulator said it could consider imposing limits on retail investments in single-stock leveraged exchange-traded funds (ETFs) if required, such products having been cited as a source of increased market volatility.
