Circuit Breakers Triggered. Korea Composite Index Plummets Toward 7,100 Mark, Falling Over 900 Points in Two Days

Tradingkey - During the early Asian session on May 18, the KOSPI Index fell by more than 4% at one point, hitting a nearly one-week low of 7,142.71. As of press time, it was still down 1.57% at 7,375.55. Notably, the index closed down 6.12% in the previous trading session at 7,493.18, with a two-day amplitude reaching as much as 904 points.

After the corresponding KOSPI 200 futures fell by 5%, the Korea Exchange triggered a KOSPI circuit breaker, suspending program trading for five minutes.

The intense market volatility over the past two days further underscores the inherent fragility of the current liquidity-driven rally in the South Korean stock market. Driven by a combination of loose liquidity and thematic speculation, the South Korean benchmark index took just seven trading days to complete a 1,000-point leap from 7,000 to 8,000. Meanwhile, significant fluctuations with intraday amplitudes exceeding 5% have become a normalized feature of the South Korean market.

The Chief Investment Officer of Eugene Asset Management stated that after the index's significant gains over the past month, this decline represents a natural pullback. The immediate catalysts were rising yields and the strike at Samsung Electronics. However, we do not view this as the start of a structural downtrend but rather a healthy correction. In fact, we believe buying opportunities for high-quality stocks are emerging once again.

Among the two major heavyweight stocks, Samsung Electronics reversed its decline to rise 1.11%, trading at 273,500 KRW; SK Hynix fell over 4% in early trading and remains down 1.04% at 1.8 million KRW.

According to the latest reports, Samsung Electronics and the South Korean labor union will restart wage negotiations today under the guidance of a government mediator. This move is expected to alleviate market concerns regarding a potentially disruptive strike at the global semiconductor leader.

South Korean Prime Minister Kim Min-suk stated following an emergency ministerial meeting on Sunday that the government will utilize all available means, including emergency arbitration, to prevent a large-scale strike at Samsung Electronics, the country's largest employer. Even if a strike occurs, measures will be taken to minimize losses. According to his estimates, a single-day shutdown of Samsung's semiconductor plants would result in direct economic losses of approximately 1 trillion KRW (about $668 million). More critically, even a brief halt in semiconductor production lines could disrupt production schedules for months. If the strike results in the mass scrapping of raw materials, market estimates suggest total economic losses could reach as high as 100 trillion KRW.