From AI Darling To Correction: What Triggered South Korea's Market Selloff?

South Korean stocks witnessed a sharp selloff on Monday, with the benchmark KOSPI plunging nearly 9% and entering correction territory as investors rushed to book profits in technology and semiconductor shares that had driven the market's record rally this year.

The KOSPI fell as much as 8.8% during trade, taking its decline from recent highs to nearly 15%. The sharp fall triggered a circuit breaker, leading to a temporary trading halt and prompting exchange officials to hold an emergency meeting to assess market volatility and ensure orderly trading conditions.

The selloff was led by semiconductor heavyweights Samsung Electronics and SK Hynix, whose shares fell as much as 11% and 10%, respectively, before recovering some losses.

AI Trade Faces Reality Check

The decline marks a sharp reversal for a market that has been one of the biggest beneficiaries of the global artificial intelligence investment boom.

Concerns over stretched valuations, profit booking and a deteriorating macroeconomic backdrop triggered heavy selling across technology stocks globally.

The weakness followed Friday's rout on Wall Street, where the Nasdaq Composite tumbled 4.2% after stronger-than-expected US jobs data raised concerns that the Federal Reserve may keep interest rates elevated for longer.

Technology and semiconductor stocks bore the brunt of the selloff. Nvidia fell more than 6%, while AMD, Micron, Sandisk and Western Digital dropped between 11% and 13%.

Investors are also assessing the potential impact of the proposed $75-billion SpaceX IPO, which some market participants believe could trigger further profit booking in existing technology holdings as investors reposition portfolios.

Foreign Investors Exit

Foreign investors have already begun reducing exposure to South Korean equities.

Market data showed overseas investors sold more than $10 billion worth of KOSPI shares on a net basis last week alone, intensifying pressure on the South Korean won.

The currency weakened to its lowest level against the US dollar since March 2009.

Despite the recent correction, the KOSPI remains up more than 70% in 2026, making it one of the world's best-performing major equity markets this year.

Geopolitical Concerns Add Pressure

Investor sentiment was also affected by renewed geopolitical tensions in West Asia after Israeli strikes on Beirut fuelled concerns over energy supplies and global economic growth.

The developments pushed oil prices and the US dollar higher, reviving fears of inflationary pressures and tighter financial conditions.

South Korea's government has announced measures aimed at stabilising the currency and pledged action against speculative trading activity in financial markets.

"The South Korean market faces risk of a 'Black Monday' event with currency instability, interest-rate repricing and profit taking in semiconductors all happening at the same time," said Kim Doo-un, an analyst at Hana Securities.

Global Markets Under Pressure

The weakness extended across Asia. Japan's benchmark Nikkei 225 fell 3.4% in early trade, while US stock futures attempted a modest recovery following Friday's selloff.

Indian markets had also ended lower last week. The Sensex declined 532 points and the Nifty lost 181 points amid continued foreign investor selling and cautious sentiment following the Reserve Bank of India's latest policy decision.