South Korea's KOSPI Extends Crash, Falls 10% As SK Hynix Earnings Disappoint

South Korea's stock market selloff deepened on Wednesday, with the benchmark KOSPI plunging another 10% after weaker-than-expected market reaction to SK Hynix's quarterly earnings reignited concerns over artificial intelligence (AI)-related investments.

The benchmark index fell below the 6,000 mark to its lowest level since early April, extending Tuesday's 11% plunge. The two-day decline has now exceeded 21%, prompting a second consecutive session of trading suspension.

The KOSPI is also on track for a record monthly decline of about 35%, reversing much of the strong rally seen earlier this year, which was largely driven by gains in chipmakers SK Hynix and Samsung Electronics.

SK Hynix Earnings Trigger Fresh Selling

The latest leg of the selloff followed SK Hynix's quarterly results.

Although the memory chipmaker reported a 557% year-on-year jump in quarterly profit, the results failed to meet elevated investor expectations, sending its shares down about 15%.

Samsung Electronics, which is scheduled to announce its quarterly earnings on Thursday, also came under heavy pressure, falling 8%.

"Given the weight of SK Hynix and Samsung on the KOSPI, there's nowhere to hide when they fall together," Josh Gilbert, Lead Analyst for Asia Pacific and the Middle East at eToro, told Bloomberg.

The sharp declines in the two technology giants weighed heavily on the broader market because of their significant combined weight in the benchmark index.

AI Investment Concerns Intensify

The back-to-back trading halts underscore growing investor concerns over the sustainability of the AI investment boom.

The benchmark index has now lost around 40% from its peak a month ago as investors increasingly question whether the massive capital spending on AI infrastructure will generate adequate returns.

The latest decline extends a broader global technology selloff that has weighed on semiconductor companies amid concerns over high valuations and intensifying competition.

Rising Oil Prices Add To Pressure

Investor sentiment was also hurt by a sharp rebound in crude oil prices. Brent crude climbed more than 4% to trade above $88 a barrel after the United States said it had intercepted an Iranian "surprise attack" on its troops and launched retaliatory strikes against Iran.

The weakness was not limited to large-cap stocks. The KOSDAQ Index, which tracks small and mid-sized companies, fell more than 8%, triggering a 20-minute trading halt earlier in the session.

According to Bloomberg, of the 15 circuit breakers triggered in the KOSPI since 2000, nine have occurred this year, highlighting the heightened volatility in South Korea's equity market.