South Korean stocks fell sharply Friday as investors reduced exposure to semiconductor shares following overnight weakness among U.S. chipmakers, the approaching market debut of a Chinese competitor, and rising tensions in the Middle East. The benchmark Kospi dropped as much as 6.1%, while Samsung Electronics, a major South Korean technology company, and SK Hynix (HXSCL), a South Korean chipmaker, each declined more than 7%. The Korea Exchange, South Korea's securities market operator, briefly activated a sidecar mechanism to suspend program selling on the Kosdaq after futures prices plunged, adding to a period of increasingly volatile trading across the country's $4.1 trillion equity market.
Investors also appeared to be cutting risk before the weekend as Middle East tensions pushed oil prices close to $100 per barrel. Foreign investors resumed selling South Korean shares after four consecutive days of net buying, with much of the reduction focused on technology stocks. Shawn Oh, head of Korea cash equities at NH Investment & Securities, said the downside appeared amplified as domestic funds reduced overweight technology positions and lowered risk while geopolitical uncertainty remained elevated.
The upcoming listing of CXMT, a Chinese memory-chip producer scheduled to make its public-market debut in China on July 27, may also be influencing semiconductor flows. Roy Lim, an equity sales trader at Samsung Securities, said some Asian hedge funds were selling Samsung Electronics (SSNLF) and SK Hynix to make room for CXMT shares. Investors may view the rotation as another near-term pressure on South Korean chip stocks as global technology weakness, higher oil prices, and geopolitical tensions continue to weigh on market sentiment.