KOSPI Plunges 8.29% to 7484 Amid Fed Rate Hike Fears

South Korea's stock market experienced a dramatic downturn on June 8, with both the KOSPI and KOSDAQ indices suffering significant losses. The KOSPI plunged by 8.29% to close at 7484.41, falling below the 8000 mark just eight trading days after surpassing it. This marked the steepest single-day decline since March 4, following the outbreak of the Israel-Iran war. The market's volatility led to the activation of a circuit breaker, halting trading for 20 minutes in the KOSPI, the third such instance this year and the ninth in history. A sell-off sidecar was also triggered after trading resumed.

Major blue-chip stocks were heavily impacted. Samsung Electronics saw its share price drop by 10.18% to 295,500 won, and SK Hynix fell 7.68% to 1,911,000 won, both losing their '300,000 won' and '2 million won' milestones, respectively. LG Electronics, which had recently surged on news of Nvidia CEO Jensen Huang's visit, also declined by 11.55%.

“

The volatility may continue for a bit longer, but the corporate earnings environment supporting the semiconductor rally remains favorable.

The primary driver for the market's sharp fall was the heightened possibility of a US Federal Reserve interest rate hike, fueled by US employment figures that exceeded expectations. Technology and AI-related stocks, which are often valued based on future growth potential, are particularly sensitive to interest rate increases due to rising borrowing costs. The disappointing earnings report from US chipmaker Broadcom further fueled concerns about a potential slowdown in AI investment, adding to the pressure on the KOSPI.

An additional factor cited was profit-taking by some investors to secure funds for the upcoming SpaceX IPO. Foreign investors continued their net selling, offloading 350 billion won worth of stocks on the KOSPI, extending a month-long trend of net sales. The KOSDAQ index fared similarly, closing down 9.08% at 911.39, erasing its gains from earlier in the year.

“

If the US May consumer price index, due on the 10th, comes in higher than expected, the volatility will likely persist until the Fed's interest rate decision on the 18th.