South Korea's KOSPI tumbles 8%, triggering circuit breakers for sixth time this year

South Korea's main stock market index, the Kospi, experienced a dramatic fall of 8.03% on Tuesday, even as tech giant Samsung Electronics announced a staggering 19-fold increase in its operating profit for the second quarter.

The Kospi index dropped 646.85 points to 7,404.48, triggering trading halts for the sixth time this year. This heightened volatility is largely attributed to investor concerns surrounding semiconductor stocks, particularly those linked to artificial intelligence.

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It is good news but can't be interpreted entirely as good news, as market expectations have grown too high to be raised further, fanning worries that high earnings will not be sustained.

Samsung Electronics' shares fell 9.75%, and rival chipmaker SK Hynix saw a decline of 10.58%. The sell-off extended to Japan, where chip stocks also experienced sharp drops. Analysts suggest that while the fundamentals of the chip sector remain strong, a desire for profit-taking and ongoing discussions about AI's impact are fueling market instability.

Despite the day's losses, the Kospi remains up 76% year-to-date, driven earlier in the year by significant rallies in Samsung and SK Hynix. However, other major companies also saw declines, including LG Energy Solution, which expects a 77% drop in operating profit due to sluggish electric-vehicle demand, and Hanwha Ocean, which plunged 24.29% after losing a submarine contract bid to a German competitor.

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Although there is no issue when it comes to the chip sector's fundamentals, such as earnings, there remains demand for profit-taking, while noises regarding AI and the chip sector are being raised again and again, raising market volatility.