The South Korean stock market experienced one of its most dramatic shocks of the past year: on Friday, the KOSPI index fell below the 5,000 mark for the first time since February. After trading opened, the index dropped 8%, triggering the exchange's "circuit breaker" — trading was halted for 20 minutes.

SK Hynix shareholders suffered some of the heaviest losses — the stock plunged 11.71% to 1,116,000 won, despite the company reporting record quarterly revenue just a week earlier.

How the US AI Stock Selloff Reached Asia

The downward momentum originated in New York. On Thursday, the S&P 500 fell 4.36% and the Nasdaq dropped 5.52%. Chipmakers were hit hardest: the Philadelphia Semiconductor Index fell 12.25% — its largest decline since March 2020.

Three key reasons for the crash:

  • new governors in Texas, Georgia, and Ohio promised to suspend or restrict data center construction;
  • Qualcomm reported a 26% decline in smartphone processor sales, missing analyst forecasts;
  • doubts about the sustainability of AI spending growth had been building before the week began.

Korean chipmakers were hit by all three factors simultaneously. SK Hynix is one of the leading suppliers of high-bandwidth memory (HBM), which is used in AI accelerators.

Samsung Electronics shares fell 9.98% to 181,400 won in the morning. Together, the two companies account for roughly half of the KOSPI index's market capitalization.

The Seoul crash began a day earlier. On Thursday, the KOSPI lost 5.28% as foreign investors sold more than 3.4 trillion won worth of shares.

What the KOSPI Circuit Breaker Signals

The Seoul exchange halted the session at 9:03 a.m. local time — just three minutes after the open. The first-tier protection trigger halts trading for 20 minutes when the index loses 8% relative to the previous close.

This is already the 11th trading halt on this exchange this year. The previous pause was on October 15 after the release of US inflation data.

In addition, the KOSDAQ exchange, where technology companies are traded, activated its sell-side sidecar protection mechanism at 9:06. As a result, automatic execution of program orders was halted for five minutes.

Japan's Nikkei 225 index suffered less. By 9:36 Tokyo time, it had fallen 5.69% to 57,605.59 points.

On October 30, the Seoul market already fell more sharply than Japan's Nikkei due to panic over IT giant Alphabet's spending. The repetition of this situation shows that the index with a high share of semiconductors reacts more acutely to news from the US.

South Korea's market has halted trading twice in a month due to news from America. First the trigger was inflation, now it's the results of local elections.

Until US officials approve rules for data centers, news from across the ocean will affect the KOSPI no less than companies' quarterly earnings.

Cryptalist Analysis: The current dynamics demonstrate the structural vulnerability of the Korean market — its overconcentration in the semiconductor sector, where two companies form half of the index's market capitalization. The activation of protection mechanisms twice in a month signals fragile liquidity and heightened sensitivity to external shocks. Institutional investors should account for the risk of further KOSPI volatility until US regulatory policy on data centers becomes clear and the sustainability of HBM demand is confirmed.