KOSPI Falls Over 4% as Samsung and SK Hynix Extend Losses

Key Takeaways

• The KOSPI Index dropped more than 4% during Monday’s session as selling intensified across South Korean technology stocks.
• Samsung Electronics and SK Hynix both fell by more than 4%, magnifying the broader index decline because of their unusually large market weightings.
• UBS and Barclays remain constructive on semiconductors, arguing that computing demand and supply constraints continue to support the sector’s fundamentals.
• Brent crude climbed above $90 per barrel as the US-Iran conflict escalated, adding inflation and interest-rate risks for South Korea.

Chip Heavyweights Deepen South Korea’s Market Decline

South Korea’s KOSPI Index fell sharply on Monday, July 20, as renewed selling in semiconductor shares combined with rising geopolitical and energy-market risks.

The benchmark was down 283.67 points, or 4.16%, at 6,536.93 by late morning after opening 0.52% lower. It later traded near 6,525, extending the substantial retreat from its 2026 peak of 9,387.

The latest decline followed another volatile session on Friday, when the KOSPI lost 6.37%. Concerns about high artificial intelligence valuations and weakening technology shares on Wall Street continued to affect sentiment in Seoul.

Samsung Electronics fell 4.5%, while SK Hynix declined 4.4%, according to Yonhap News Agency. Losses were not limited to chipmakers: Hyundai Motor dropped 6.59% and Hanwha Aerospace fell 4.03%. Energy producer S-Oil moved in the opposite direction, gaining 3.04% as crude prices climbed.

Samsung and SK Hynix together represent more than half of the KOSPI’s total market capitalisation. This concentration means that relatively modest movements in the two companies can have an outsized effect on South Korea’s headline index.

Why Samsung and SK Hynix Stocks Are Falling

The latest weakness follows an extended period of profit-taking across the global semiconductor industry.

Samsung Electronics has fallen by approximately 34% from its 2026 high and is trading around its lowest level since early May. SK Hynix has experienced an even deeper correction, losing roughly 40% from its peak.

Similar pressure has appeared elsewhere in the memory-chip market. Japanese storage-chip producer Kioxia has suffered a substantial decline, while US-listed semiconductor funds such as the Roundhill Memory ETF, VanEck Semiconductor ETF and iShares Semiconductor ETF have also retreated from recent highs.

Part of the sell-off reflects questions about whether semiconductor earnings can continue growing quickly enough to justify the sector’s elevated valuations. AI infrastructure spending has driven strong demand for high-bandwidth memory and advanced computing components, but investors are increasingly considering the possibility of slower capital expenditure or greater supply later in the cycle.

Market structure has also contributed to volatility in South Korea. Leveraged single-stock exchange-traded funds linked to Samsung and SK Hynix must regularly rebalance their holdings. During falling markets, that process can create additional selling and amplify price movements.

Because the two chipmakers dominate the KOSPI, forced or systematic selling in their shares can affect the entire index—even when the original catalyst is limited to the semiconductor sector.

UBS and Barclays Remain Positive on Semiconductors

Despite the sharp correction, analysts at UBS and Barclays have maintained broadly positive views on the semiconductor industry.

UBS believes demand for computing capacity continues to exceed available supply. The bank also expects supply-chain constraints to remain in place, potentially supporting semiconductor pricing and earnings.

Barclays has characterised the recent selling as position reduction rather than a wholesale withdrawal from the sector. This distinction suggests some investors may be locking in profits or reducing exposure after a strong rally instead of responding to a sudden deterioration in underlying chip demand.

Analysts cited by Benzinga also noted that semiconductor ETFs continued to attract capital despite recent price declines. However, fund inflows do not guarantee that the sector has reached a bottom.

The next major test will come from big-technology earnings. Alphabet, Intel and Tesla are among the companies scheduled to report this week. Investors will pay particular attention to capital-expenditure plans, AI infrastructure spending and management guidance.

Continued investment in data centres and AI hardware could support demand for memory products supplied by Samsung and SK Hynix. Conversely, signs of delayed projects, weaker returns on AI investment or lower spending forecasts could reinforce concerns about the semiconductor cycle.

KOSPI Index Technical Outlook

The KOSPI’s technical structure has weakened following its rapid decline from the June peak.

The index has moved below its 50-day exponential moving average and the 38.2% Fibonacci retracement level identified in the original chart analysis. These breaks indicate that short-term momentum remains tilted towards the downside.

The Average Directional Index was reported near 24. An ADX reading approaching 25 can indicate that an existing trend is strengthening, although the indicator does not determine whether prices will rise or fall.

The 6,500 area is now an important psychological level. A sustained move below it could expose the KOSPI to a deeper retracement, while a recovery above recently broken moving-average resistance would be needed to weaken the current bearish structure.

Near-term direction is likely to depend on semiconductor earnings expectations, foreign investor flows, leveraged-product rebalancing and developments in the Middle East. With those forces pulling the market in different directions, volatility may remain elevated even if the long-term demand outlook for AI chips remains supportive.