KOSPI plunges 6%, falling below 6,500 points; sell-side sidecar activated for the first time in 2 weeks

South Korea's stock market suffered a sharp downturn on October 19, with the KOSPI index plummeting over 6% and falling below the 6,500-point mark. The market opened with a 4.96% drop and continued to decline, reaching 6,432.57 by 9:11 AM. This significant fall erases the gains made in the previous week, when the KOSPI briefly surpassed 7,000 points.

The sell-off was largely attributed to deteriorating global investor sentiment, exacerbated by the U.S. 30-year Treasury yield reaching a 19-year high. This increase in market interest rates put pressure on equities worldwide. The KOSPI 200 futures index also fell more than 5%, triggering a sell-side "sidecar" – a measure to halt trading for five minutes to curb excessive volatility – for the second time in approximately two weeks, the first being on October 6.

Major South Korean companies saw substantial losses. Samsung Electronics dropped 6.42% to trade at 251,250 won, while SK Hynix fell 7.34% to 1.54 million won. SK Square experienced a dramatic 10.31% plunge, and Samsung SDI and Hyundai Motor saw declines of 5.07% and 4.48%, respectively.

U.S. stock markets also closed lower overnight, with the Nasdaq Composite down 1.33%, the S&P 500 down 0.69%, and the Dow Jones Industrial Average down 0.22%. The weakness was particularly pronounced in semiconductor stocks, with Micron and Sandisk seeing significant drops. The Philadelphia Semiconductor Index, a key indicator for the global semiconductor sector, fell sharply by 4.98%.

Analysts pointed to the receding expectations of a U.S.-Iran ceasefire and the surge in market interest rates, including U.S. 30-year and Japanese 10-year Treasury yields, as key factors driving profit-taking, especially in semiconductor stocks. Meanwhile, the KOSDAQ index also declined, falling 3.26% to 807.00.

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The U.S.-Iran ceasefire expectations receding and market interest rates such as U.S. 30-year and Japanese 10-year Treasury yields surging have created pressure, leading to profit-taking centered on semiconductor stocks.