South Korea’s Kospi Plunges 10.8% as Chipmaking Stocks Trigger Asian Rout

Equity markets faced a punishing session in Asia on Tuesday, led by a slump in South Korea that triggered multiple trading halts. The benchmark Kospi index closed down 10.8% at 6,023.66, its lowest level since April, after shedding nearly 11% during the day, according to apnews.com. The Korea Exchange suspended cash trading in both the Kospi and Kosdaq gauges for 20 minutes each after earlier halting program trades as futures tumbled, Bloomberg reported.

Samsung and SK Hynix Lead the Asian Semiconductor Rout

The damage across Asian bourses centered squarely on major semiconductor heavyweights. Shares in Samsung Electronics sank 13.4%, while SK Hynix tumbled 14.7%. The downward pressure extended to SK Hynix’s U.S.-traded shares, which fell below their initial public offering price from earlier in the month.

Regional indices reflected the wider contagion. Japan’s Nikkei 225 dropped 4% to 62,364.92, Taiwan’s Taiex skidded 4.7% with TSMC shares falling 3%, and mainland China’s Shanghai Composite lost 1.2% to close at 3,813.31, apnews.com. Hong Kong’s Hang Seng index managed a modest 0.3% gain to 25,289.04, while Australia’s S&P/ASX 200 bucked the regional trend to rise 0.6%.

“The market is falling out of love with chipmakers at the moment and that’s been a big driver of the bull market in South Korea.”

InvestingLive, via CoinDesk

Chinese Chip Competition and the AI Bubble Debate

Analysts pointed to mounting concerns over the sustainability of the artificial intelligence boom and rising competition from Chinese startups as primary catalysts for the sell-off. Market participants moved aggressively to lock in profits from the prolonged rally in tech shares amid fears that rising competition from Chinese AI startups and chipmakers might undermine global market leaders.

Investor anxiety was further inflamed by a report from technology news publication The Information indicating that China had begun mass production of homegrown deep ultraviolet (DUV) chipmaking equipment used to print circuit patterns onto silicon wafers, according to AP reporting.

“We believe the market was likely spooked by the progress of China’s chipmaking equipment capabilities, and was worried that this progress would threaten the competitive position of global chipmaking and chip equipment leaders.”

South Korea’s KOSPI Index Plunges Over 8 Percent Triggering Circuit Breaker

Jing Jie Yu, equity analyst at Morningstar

Despite the steep declines, analysts argued that the panic may be overstated. That said, we believe the sell-off today is largely a knee-jerk reaction and overdone, Jing Jie Yu added, noting that the dominant position of established global leaders is unlikely to be threatened meaningfully.

Wall Street Futures Slip as Bitcoin Slides

The Asian rout immediately spilled over into Western markets. U.S. stock index futures dropped in early trading on Tuesday, with Nasdaq 100 futures falling 0.73% and S&P 500 futures dipping 0.1%, while Dow futures rose 86 points or 0.16%, CNBC reported. On Monday, Wall Street had ended mixed, with the S&P 500 gaining less than 0.1% and the Dow rising 0.5%, while the Nasdaq composite fell 0.2% for its fourth loss amid a broader retreat in semiconductor shares including Nvidia, AMD, and Micron Technology, according to AP data.

Digital asset markets also felt the shockwaves. Bitcoin fell from nearly $65,000 down to $63,200—a 2.7% drop—bringing pressure across the broader cryptocurrency market including ether, XRP, and solana as CoinDesk reported.

Federal Reserve Rate Decision and Oil Market Shifts

Markets are bracing for a high-stakes Federal Reserve rate decision due on Wednesday. Investors widely expect the central bank to keep interest rates on hold while searching for monetary policy direction, CNBC noted.

“Our call is for no change. We see inflation expectations tame enough for comfort. Also, the structure of the curve does not shape up for a rate hiking cycle. Specifically, the 5yr is rich to the curve.”

Padhraic Garvey, regional head of research for the Americas at ING

Garvey added that it’s unusual for the Fed to start a rate hiking cycle with the 5yr rich to the curve, suggesting that any unexpected hikes would likely be reversed within a 12-month window, according to ING’s note.

Meanwhile, oil prices extended declines as the United States and Iran refrained from strikes for a third day, with Middle Eastern officials reporting progress by mediators to restart negotiations, Asahi reported. International benchmark Brent crude fell 2.1% to $84.07 a barrel, while U.S. benchmark crude lost 2% to $80.99 a barrel, according to AP figures.