Korean stocks hit circuit breaker again: SK Hynix and Samsung Electronics both fall, what's happening with the semiconductor sector?

On June 29, 2026, after the Korean stock market opened, it quickly fell. The Korea Composite Stock Price Index (KOSPI) at one point widened its decline to 3%, reporting 8,148.69 points during the trading session. The Korea Exchange then immediately initiated the KOSDAQ index circuit breaker mechanism (Sidecar), pausing programmatic buy orders for 5 minutes. At the individual stock level, the “twin giants” in semiconductors suffered a major setback—Samsung Electronics fell more than 5% intraday, SK Hynix dropped nearly 5%, Samsung Biologics fell 5.2%, Hyundai Mobis fell 3.7%, and Hyundai Motor fell 2.91%.

This was the latest in multiple circuit breakers in the Korean stock market since 2026. Since 2000, the KOSPI index has triggered 11 circuit breakers, with 5 occurring in 2026. The market’s intense volatility is not an isolated incident, but the result of multiple structural factors converging.

How the US Semiconductor Plunge Is Transmitting to the Korean Market

The direct trigger for this sharp drop in Korean stocks came from a collective selloff in the US semiconductor sector last Friday.

On June 26 (last Friday), the Philadelphia Semiconductor Index plunged 737.30 points over the entire day, a decline of 5.29%, with nearly all component stocks closing lower. The decline was especially brutal in the memory chip track: Western Digital closed down 13.20%, Seagate Technology fell 12.24%, SanDisk dropped 10.46%, and Micron Technology declined 6.70%. Notably, Micron Technology had surged more than 15% on the previous trading day due to earnings that beat expectations, yet its stock price swung violently within just two trading sessions, highlighting the fragility of sentiment in the sector and the short-term nature of capital. In addition, Texas Instruments fell 8.46%, Qualcomm dropped 7.57%, and NXP Semiconductors fell 7.24%, with the entire AI chip industry chain under pressure.

From the full-week performance perspective, the divergence in market style further widened—the Dow Jones Industrial Average climbed cumulatively 0.40% for a third straight week of gains, the S&P 500 fell cumulatively by about 1.90%, and the Nasdaq index, dragged down by tech stocks, dropped cumulatively by about 4.40%, with signals of a rotation between growth and value continuing to strengthen.

The high correlation between the Korean stock market and the US semiconductor sector stems from Korea’s deep dependence on the semiconductor industry. Samsung Electronics and SK Hynix together account for nearly 60% of the KOSPI index weight. When the global semiconductor sector is hit by a selloff, the Korean market can hardly manage to stay unscathed. The Philadelphia Semiconductor Index’s single-day plunge of 5.29% directly triggered systemic panic in the Korean market’s chip stocks.

Even Though Memory-Chip Fundamentals Remain Strong, Why Are Stock Prices Still Plunging?

The sharp stock-price drop contrasts starkly with the strength of industry fundamentals—this is the key contradiction most worth watching in the current market.

Judging by export data, the fundamentals of Korea’s semiconductor industry have not deteriorated. According to trade statistics released on June 22 by the Korea Customs Service, from June 1 to 20, 2026, exports of major memory semiconductors have already exceeded $23 billion, accounting for more than 60% of the total $37.16 billion performance for all of May. Based on the recent monthly growth trends of HBM, NAND, and SSD, total memory semiconductor exports for the full month of June are expected to reach $38 billion to $42 billion, with a possibility of breaking the historical record.

On the price front, Aletheia Capital, in a report it released earlier, significantly raised its DRAM and HBM price expectations. It expects the average selling price of DRAM in the third quarter of 2026 to rise by 30%, far higher than the previously estimated 10%–15%, and that the average selling price of HBM could potentially double year by year by 2027. The report pointed out that memory is becoming the most critical component in AI hardware systems, with its share of comprehensive value rising from about 40% in 2025 to more than 70% by 2027. Morgan Stanley also said that, driven by ongoing growth in demand from AI data centers, the degree of supply-demand tightness across the hard drive and memory supply chain has exceeded expectations, and that shortages may persist—at least—until 2028.

Vivek Arya, a senior semiconductor analyst at Bank of America Securities, said bluntly: “Without memory chips, there is no artificial intelligence.” He also noted that the recent surge in earnings is far beyond market expectations, reflecting a permanent shift rather than a typical cyclical upswing.

When strong fundamentals and plunging stock prices coexist, it indicates that the current market decline is more a problem at the trading level than a reversal of industry logic. Experts point out that the AI industry has not entered a full-blown bubble stage; the recent plunge is more driven by over-crowding in trading—large amounts of capital are piling into speculating on AI-related concepts, and once a sudden negative catalyst hits, the market becomes extremely fragile and prone to intense panic selling.

Foreign Capital Exiting and Retail Leverage Taking the Bag: How Capital Battles Magnify Volatility

The current intense volatility in the Korean stock market is closely tied to its unique pattern of capital games.

In a Korean stock strategy report released by JPMorgan on June 25, it noted that since the beginning of this year, foreign investors have net sold out of the Korean stock market by approximately $95 billion, and are expected to easily break the annual foreign net outflow record for any single Asian market. At the same time, retail investors (including local ETF purchases) have accumulated net purchases of about $80 billion over the course of the year, becoming a major force supporting the market.

This “foreigners sell and retail adds leverage” pattern readily triggers a chain reaction when the market turns downward. JPMorgan characterized foreign capital outflows from Korea as “non-discretionary” rather than active bearishness. The core reason is that the market capitalization of memory-chip giants represented by Samsung Electronics and SK Hynix has ballooned sharply, reaching the position limits of long-term funds in emerging markets, forcing those funds to continuously cut positions as stock prices rise to meet benchmark constraints. Data shows that over 90% of total foreign outflows this year came from these two memory-chip stocks.

Korean retail investors’ leveraged stock investments have already reached the financing ceiling set by local brokerages. CICC research believes that the current on-exchange leverage multiple for Korean stocks is around 2x to 5x, with absolute leverage at historical highs. High leverage itself amplifies volatility and can even bring liquidity pressure—falls of 16% to 36% could trigger margin calls, and recent forced-liquidation pressure has already increased.

This capital-games configuration is unlikely to reverse in the short term. As long as memory-chip stocks continue to outperform the regional benchmark, the benchmark constraints on emerging market funds will not disappear, and pressure from foreign outflows will remain.

Why Are Circuit Breakers Triggered So Frequently? What’s Wrong with the Korean Market Ecosystem?

The frequent triggering of circuit breakers since 2026 has revealed deep structural problems in the Korean market ecosystem.

The abnormal surge in Korean market volatility is closely related to the explosive growth of leveraged ETFs both within and outside the country. The asset management scale of leveraged ETFs with Korean assets as the underlying has increased to $50 billion, with most of the incremental growth coming from the market’s own rise. These ETFs mainly establish exposure through stock index futures and some spot and options, driving a sharp increase in open interest in single-stock futures.

At the same time, demand for ETFs for “crash protection” also pushes up implied volatility— the ratio of VKOSPI to VIX is currently close to 5 times, while the historical normal level is about 1 time. The scale of Gamma imbalances related to leveraged ETFs has already exceeded $1 billion, producing a significant amplification effect on the market’s bidirectional volatility.

The Korea Exchange’s circuit breaker mechanism is designed to smooth volatility, but in today’s highly leveraged market environment, circuit breakers may instead intensify the concentrated release of panic. When algorithmic trading is paused, liquidity dries up instantly, and selling pressure in the spot market increases further. This mismatch between the mechanism and market structure means that each circuit breaker is not just the result of price volatility, but also becomes a catalyst for further expansion of volatility.

Why Didn’t a 2,000 Trillion Won Investment Plan Support the Market?

On June 29, the market was not only driven by negative news. Samsung Group and SK Group announced an unprecedented investment plan—over the next ten years, the total investment could be as high as 2,000 trillion won (about RMB 8.8 trillion yuan). The plan will focus on semiconductors, AI computing data centers, and physical AI.

According to reports, Samsung Electronics and SK Hynix are expected to each build four to five semiconductor manufacturing plants in the Gwangju area. Samsung will also build a chip packaging plant in South Chungcheong Province, while SK Hynix will expand its NAND flash memory plant in North Chungcheong Province. Korean President Lee Jae-myung held an event in the afternoon to introduce the “Great Leap: Three Major Super Projects.” After officials from the Ministry of Trade, Industry and Energy and the Ministry of Science and Technology explained government policy measures, Samsung and SK Group each presented their respective investment plans.

However, such a massive investment plan could not prevent stocks from falling. The market’s reaction is worth pondering: on one hand, although the 2,000 trillion won investment scale is staggering, it corresponds to long-term spending over the next decade and cannot be converted into incremental performance in the short term; on the other hand, massive capital expenditures imply rising future depreciation and expense pressure, and in an environment where market sentiment is already fragile, long-term positives may be interpreted as short-term negatives.

From Korean Stock Volatility: Reconstructing the Logic Behind Global Tech Asset Pricing

The sharp volatility in Korean stocks is not an isolated phenomenon, but a snapshot of the global tech asset pricing logic being reshaped.

Last week, the Federal Reserve’s shift in monetary policy toward a hawkish stance directly suppressed high-valuation tech sectors. The Nasdaq index fell by about 4.40% for the week; signals of rotation between growth and value continued to strengthen. Against the backdrop of changes in the interest-rate environment, the market is reassessing valuation logic for tech stocks, especially AI-related assets—shifting from simply chasing growth expectations to paying more attention to the ability to deliver earnings and the quality of cash flows.

As a core link in the global semiconductor industry chain, Korea’s stock market volatility is essentially a regional reflection of the global repricing of tech assets. Samsung Electronics and SK Hynix are not only pillars of the Korean economy, but also indispensable parts of the global AI industry chain. When global investors begin reassessing risk premia for tech assets, the Korean market—which is highly concentrated in the semiconductor industry—naturally becomes one of the regions experiencing the most severe volatility.

JPMorgan maintains a bullish view on the Korean stock market, raising its KOSPI base-scenario target price for the next 12 months to 12,500 points and advising investors to add to positions on any pullbacks. The institution believes that the upside in fundamentals driven by AI, the wealth effect for the country stemming from corporate earnings growth, and the potential for valuation recovery from corporate governance reform still form the core bullish logic for the Korean stock market.

But in the short term, multiple factors—continued foreign capital outflows, retail leverage nearing its limit, and the amplifying effect of leveraged ETFs—mean that the high-volatility state of the Korean stock market may persist.

Summary

The circuit breaker triggered by the sharp drop in Korean stocks on June 29, 2026, is the result of multiple factors converging. From the direct trigger, the 5.29% plunge in the Philadelphia Semiconductor Index last Friday transmitted through the industry chain to the Korean market. From the capital side, the fragile balance created by foreign investors’ net outflows of approximately $95 billion this year and retail investors taking up leverage of $80 billion is being broken. From the market ecosystem, leveraged ETF size has expanded to $50 billion, and Gamma imbalances have exceeded $1 billion, amplifying the market’s bidirectional volatility. Despite continued strength in semiconductor export data and the announcement of a 2,000 trillion won investment plan by Samsung and SK, trading-level pressure continues to dominate market direction in the short term. The sharp volatility in Korean stocks is not only a case specific to a regional market—it also reflects a deeper global trend of tech assets being repriced in a high-interest-rate environment.

FAQ

Q1: How does the circuit breaker mechanism in the Korean stock market operate?

The Korea Exchange’s circuit breaker mechanism mainly includes two types: when the KOSPI index’s intraday decline reaches 8% or more, a Level 1 circuit breaker is triggered, suspending trading for 20 minutes; when the KOSPI 200 futures price’s percentage change versus the settlement price from the previous trading day reaches 5% and persists for at least 1 minute, the “Sidecar” mechanism is triggered, suspending programmatic trading for 5 minutes. The Sidecar mechanism triggered on June 29 is for the KOSDAQ index.

Q2: Why are Samsung Electronics and SK Hynix so important to the Korean stock market?

Samsung Electronics and SK Hynix together account for nearly 60% of the KOSPI index weight. The two companies are core suppliers of global memory chips (DRAM and NAND), and their stock price fluctuations have a decisive impact on the benchmark index.

Q3: Why do foreign investors keep pulling money out of the Korean stock market?

JPMorgan characterizes foreign capital outflows as “non-discretionary” position reductions. The core reason is that the market capitalization of Samsung Electronics and SK Hynix has expanded sharply, reaching the holding limits of long-term funds in emerging markets. This forces funds to continuously cut positions as stock prices rise in order to comply with benchmark constraints.

Q4: What is the situation with leveraged trading by Korean retail investors?

The Korea Capital Market Institute states that Korean retail investors’ leveraged stock investments have reached the financing ceiling set by local brokerages. CICC estimates that the current on-exchange leverage multiple for Korean stocks is around 2x to 5x, and absolute leverage is at a historical high.

Q5: Has the fundamental condition of the semiconductor industry deteriorated?

Based on available data, the semiconductor industry’s fundamentals have not deteriorated. Korea’s June memory semiconductor exports are expected to reach $38 billion to $42 billion, potentially hitting a record high. DRAM and HBM price expectations have been raised by multiple institutions. The current stock price declines reflect more issues related to crowded trading and capital flows than a reversal of industry logic.