South Korea shares test 200-day moving average for first time in 17 months

South Korea's KOSPI index experienced a significant 8% drop on Thursday, marking the first time the circuit breaker has been triggered in 2-1/2 months. The decline was primarily driven by a tech-led selloff on Wall Street, triggered by sticky US inflation data that increased expectations of further rate hikes. As of 0338 GMT, the KOSPI was trading at 5,528.05, its lowest level since July 29 when the market last faced a 20-minute trading halt under the circuit-breaker mechanism.

This event marked the 10th activation of the circuit breaker on the KOSPI this year, and the 16th in its history.

The market's volatility had been stabilizing since July, following tighter regulations introduced to curb a retail boom in leveraged single-stock exchange-traded funds. However, the KOSPI was on track for a seventh consecutive day of losses, its longest losing streak since September 2024. Analysts noted that the market's sensitivity was focused on the sustainability of capital raising and the potential for real income from massive infrastructure investment, specifically in AI services.

Tech giants Samsung Electronics and SK Hynix suffered the most significant losses, with Samsung falling 9.70% and SK Hynix down 11.35%, following a 4.3% drop in the Philadelphia Semiconductor Index. The market's inability to find new buyers since the end of buyback programs at Samsung and SK Hynix was a contributing factor to the volatility. Other major index components also declined, including battery maker LG Energy Solution and Hyundai Motor. Only 52 shares advanced among the total 916 traded issues, while 855 declined.

Foreign investors were net sellers, offloading shares worth 2.9 trillion won ($2.15 billion). Despite a 31% year-to-date rise, the KOSPI remains 39% below its record high reached in late June. The Korean won was trading at 1,348.2 per dollar, a 0.44% decrease from the previous close. The most liquid three-year Korean treasury bond yield fell by 4.4 basis points to 3.841%, while the 10-year yield dropped by 5.7 basis points to 4.188%.