Kospi Crashes Below 5,300 as Sell-Off Intensifies

South Korea's stock market plunged into fresh turmoil on Wednesday as the Kospi extended its historic sell-off, tumbling as much as 12.6 percent intraday to dip below the 5,300 mark before paring some losses. The benchmark's collapse triggered a circuit breaker for the second consecutive trading day, an unprecedented occurrence that has rattled investors already reeling from Tuesday's near-11-percent rout.

The circuit breaker halted Kospi trading at 12:32 p.m. after the index sank as low as 5,262.77, its lowest level in nearly six months. The junior Kosdaq market was also frozen after falling more than 8 percent, marking the first time both bourses have suspended trading on back-to-back sessions. A sidecar mechanism, which temporarily halts program trading, was also activated on both markets amid the chaos.

Retail and foreign investors drove the sell-off, dumping nearly 2 trillion won ($1.38 billion) and 1 trillion won worth of shares respectively as of mid-afternoon, while institutions stepped in as net buyers of roughly 2.9 trillion won. Heavyweight chipmakers bore the brunt of the selling, with Samsung Electronics and SK Hynix both sliding by double digits at points during the session and dragging the broader index down with them.

SK Hynix's losses deepened even after the company posted a record second-quarter operating profit of 60.5 trillion won, more than six times higher than a year earlier, because the figure missed market forecasts of around 64 trillion won. The disappointing beat failed to calm fears that spending and valuations tied to the artificial intelligence boom have outrun near-term returns, compounding Tuesday's global chip sell-off sparked by concerns over China's advancing memory-chip capabilities and the strong trading debut of Chinese chipmaker ChangXin Memory Technologies.

"Today's plunge goes well beyond what can be considered a normal market move," said Han Ji-young, an analyst at Kiwoom Securities, describing the rout as driven largely by capitulation as hopes for a rebound evaporated. Han pointed to SK Hynix's underwhelming earnings, diminished expectations for shareholder returns, and renewed uncertainty over US-Iran talks as catalysts, adding that surging trading in single-stock inverse products was amplifying the volatility.

Wednesday's slide followed Tuesday's 11-percent plunge, which had already marked the Kospi's steepest daily fall since early March and pushed the index to a three-month low. At its intraday trough on Wednesday, the Kospi stood 44 percent below the record 9,385.59 it hit on June 19, when an AI- and semiconductor-fueled rally propelled the market to all-time highs.

Analysts warned that sentiment has soured so severely that many investors no longer see current valuations, however historically low, as a reliable signal that the market has bottomed out.