A sharp jump in U.S. Treasury yields sent risk appetite tumbling, prompting foreign and institutional investors to sell a combined 4.8 trillion won ($3.5 billion) worth of stocks. Samsung Electronics (005930.KS) and SK hynix (000660.KS) fell more than 7% and 9%, respectively, while the KOSPI plunged sharply enough to trigger a sell-side sidecar during the session.
The KOSPI closed at 6,471.17, down 398.66 points, or 5.80%, from the previous session, the Korea Exchange (KRX) said on the 19th. The index fell as low as 6,400.81 during the session before individual buying helped it barely hold the 6,400 line.
As the KOSPI plunged, a temporary suspension of program sell orders — a sell-side sidecar — was triggered at around 9:06 a.m. It was the 48th sidecar in the KOSPI market this year, and the 25th on the sell side. A KOSPI sell-side sidecar is triggered when KOSPI 200 futures fall more than 5% from the previous session for one minute. It is a market-stabilization mechanism that halts the effect of program sell orders for five minutes.
On the main board, foreign and institutional investors unloaded their holdings into the market. Foreign investors sold a net 3.5036 trillion won, the largest selling of the month and the biggest since 4.5261 trillion won on the 28th of last month. Institutions also sold 1.3244 trillion won, while only individual investors bought 4.6367 trillion won.
Most top-cap stocks were weak. While LG Energy Solution (373220.KS) gained 1.85%, Samsung Biologics (207940.KS) 0.85% and Hanwha Aerospace (012450.KS) 2.71%, Samsung Electronics fell 7.82%, SK hynix 9.75%, SK Square 11.54%, Samsung Electro-Mechanics 3.68%, Hyundai Motor (005380.KS) 4.83% and KB Financial Group (105560.KS) 1.25%.
Analysts attribute the decline to Middle East tensions and the surge in Treasury yields, which worsened investor sentiment and dragged down the index. The failure to extend a ceasefire between the United States and Iran pushed up oil prices and highlighted inflationary pressure. Bond selling emerged in the market, and yields jumped. The yield on the 30-year U.S. Treasury rose to around 5.33% during the session, the highest level in 19 years since 2007. The surge in Treasury yields sharply curbed risk appetite, pressuring the market.
The jump in Treasury yields increased the capital-spending burden facing the artificial intelligence (AI) industry, and concerns emerged over delays in improving OpenAI's profitability, freezing investor sentiment toward memory chips, an essential component of the AI industry. Analysts also point to greater pressure to lock in profits on chip stocks, which had surged as beneficiaries of the AI boom.
"The market plunged as foreign investors turned net sellers and institutional flows continued to exit," said Lee Kyung-min, an analyst at Daishin Securities. "A pullback centered on the semiconductor sector, which had led the recent sharp rebound, left the market weak."
