South Korea's Kospi posts biggest fall since early March as chipmakers slump

[SEOUL] South Korean shares tumbled nearly 11 per cent on Tuesday (Jul 28) in their worst session in about five months, as a global selloff in chipmakers hammered SK Hynix and Samsung Electronics, and CXMT’s stellar market debut deepened worries about competition from China.

The benchmark Kospi closed down 732.09 points, or 10.84 per cent, at 6,023.66, posting its biggest daily loss since March 4, when the index posted a record fall on the breakout of the Iran war.

It fell as much as 11.3 per cent earlier in the day, triggering a circuit breaker for the eighth time this year and 14th in history. It also traded below the 6,000 level for the first time since April 14.

The Kospi has declined 29 per cent so far this month, exceeding its record monthly fall of 27 per cent in October 1997. It is down 34 per cent from the June peak of 9,114.55 but still up 43 per cent year-to-date.

Memory-chip maker SK Hynix sank 14.7 per cent after its American depositary receipts (ADRs) fell to a record low in New York and dropped below their initial US offering price. Samsung Electronics, another major index constituent, fell 14.4 per cent in its biggest daily loss since October 2008.

The two chipmakers account for more than half of the Kospi’s weighting, amplifying the impact of the sector-wide selloff on the broader market. SK Hynix and Samsung are scheduled to report their second-quarter earnings later this week.

Market sentiment was further dampened by developments in China, including the blockbuster market debut of ChangXin Memory Technologies (CXMT) and reports that a Chinese state-backed firm has begun producing immersion DUV lithography equipment.

“The market’s concern lies less in CXMT’s current earnings and more in its potential for accelerated capacity expansion to rival Korean companies and technology development following its IPO,” said Kim Seok-hwan, a Seoul-based market analyst at Mirae Asset Securities.

South Korea’s top financial regulator said authorities would consider a cap on single-stock leveraged exchange-traded fund (ETF) investments, which have been raising market volatility since first introduced in May, for retail investors if needed, according to reports.

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Foreigners were net sellers of shares worth 5 trillion won (US$3.42 billion), while retail investors bought 4 trillion won.

Of the total 917 traded issues, only 36 shares advanced, while 878 declined.

The won was quoted 0.2 per cent higher at 1,462.5 per dollar on the onshore settlement platform, erasing early losses of 0.5 per cent to 1,472.1. Traders attributed the gains to dollar selling by SK Hynix related to its US share sale. REUTERS