South Korea's benchmark Kospi index has officially entered bear market territory after falling more than 20 per cent from the record highs it reached in June, marking a sharp reversal for one of this year's best-performing equity markets. The decline has been driven largely by a steep sell-off in heavyweight semiconductor stocks, including Samsung Electronics and SK Hynix, amid concerns over the sustainability of the artificial intelligence (AI)-driven chip rally.
The Kospi fell over 5 per cent in Wednesday's trading, extending losses for a third consecutive session. The correction follows months of strong gains that had propelled the index to all-time highs, fuelled by optimism surrounding AI-related investments and robust earnings expectations for chipmakers.
Investor sentiment weakened after global semiconductor stocks came under pressure, prompting heavy selling across Asia's technology sector. Shares of Samsung Electronics and SK Hynix declined sharply despite strong earnings expectations, as investors questioned whether the rapid expansion in AI-related spending could be sustained over the long term.
The market downturn has also been compounded by foreign investor outflows, concerns over memory-chip pricing and broader geopolitical uncertainties. Volatility intensified during the session, with exchange safeguards briefly activated after the index's steep decline.
Despite entering a technical bear market, analysts note that the Kospi remains among the world's strongest-performing major equity indices this year, following its substantial rally in the first half of 2026. Some market participants view the correction as profit-booking after an extended surge rather than the beginning of a prolonged downturn.
South Korean authorities have said they are closely monitoring financial markets and stand ready to respond if volatility intensifies. Investors are now awaiting upcoming corporate earnings, developments in the global semiconductor industry and signs of stabilisation in AI-related demand, all of which are expected to determine the market's near-term direction. |
