Stocks that surged Monday on anticipation of Nvidia CEO Jensen Huang's visit to South Korea and his planned meetings with major companies reversed sharply Tuesday as investors rushed to lock in profits. Though Huang has yet to arrive in Korea, the dissipation of the catalyst is fueling investor unease. The Kospi, which had crossed 8,900 in early trading amid dreams of breaking 9,000, was driven back to the 8,600 level by heavy foreign selling, exhibiting extreme volatility.
As of 10:10 a.m. Tuesday, the Kospi was down 152.19 points, or 1.73%, at 8,636.19. The Kosdaq fell 31.12 points, or 2.96%, to 1,018.91, sharply widening its losses from earlier in the session.
Leading the decline are the so-called "Jensen Huang theme stocks" that powered Monday's rally. The weakness is particularly pronounced in LG Group shares. LG Electronics, which hit the daily upper limit for two consecutive sessions and showed a gain of more than 16% in pre-market trading, was trading 6.83% lower at 354,500 won. LG Innotek tumbled 19.22% to 1.236 million won, while holding company LG slumped 15.74%.
Other large caps that rallied Monday on hopes of partnerships with Nvidia followed a similar pattern. Doosan fell 10.94% to 1.962 million won, and Naver dropped 6.08% to 255,000 won, erasing all of their early-session gains. Among major chipmakers, key Nvidia partner SK Hynix slipped 2.16%, while Samsung Electronics rose 2.01%, helping cushion the index. Only a handful of stocks, such as SK Telecom (up 6.42%) and Samsung Life Insurance (up 4.51%), held onto gains on individual catalysts.
Behind the abrupt reversal is heavy foreign selling. On the main bourse, foreign investors unloaded 2.68 trillion won worth of stocks in just over an hour. Retail investors absorbed the supply with 2.63 trillion won in net purchases, but appeared unable to keep pace with the deluge.
Analysts attributed the sell-off to a wave of profit-taking triggered as the index, having climbed without pause, hit the psychological resistance at 9,000. "Anxiety over the rapid short-term gains combined with the burden of breaking through 9,000, releasing a flood of selling all at once," said Lee Young-gon, head of the research center at Toss Securities. "Above all, with capital heavily concentrated in a few large caps such as semiconductors, when those market leaders waver, the entire market shakes more violently." He also cited holiday-related risk aversion and recently listed single-stock leveraged products as factors stoking intraday volatility.
Some have pointed to algorithmic trading as the force behind the massive foreign selling that hit in such a short span. "Foreigners selling more than 3 trillion won in a brief early-session window is likely the result of program (algorithmic) trading by overseas funds — now larger than active funds — forcefully pushing back against an overheated market," said Kim Tae-hong, CEO of Growth Hill Asset Management. "Basket-level selling was heavy enough to instantly flip stocks like Naver, which had been rallying early in the session, into sharp declines." While some in the market have raised the possibility of ETF rebalancing, the prevailing view is that mechanical profit-taking via program trading is the most likely culprit.
