South Korea's benchmark Korea Composite Stock Price Index (KOSPI) collapsed 669.01 points, or 8.95 percent, to close at 6,806.93 on Monday, 13 July, as investors aggressively offloaded technology shares for profit-taking while fresh Middle East tensions rattled global sentiment. The Korean won also weakened against the US dollar, compounding the market stress.

Scale of the Selloff

The KOSPI touched an intraday low of 6,783.43 before recovering marginally to close at 6,806.93. Trade volume stood at 469.86 million shares worth 39.8 trillion won (approximately US$26.5 billion), with decliners overwhelming gainers at a ratio of 713 to 179.

Institutional investors offloaded a net 2.22 trillion won worth of shares, while foreign investors sold a net 1.7 trillion won. Retail buyers absorbed the bulk of the selling, purchasing a net 3.9 trillion won — a sign of domestic investors stepping in at lower levels even as large players exited.

Circuit Breaker Triggered

After opening 0.85 percent lower, the KOSPI's losses accelerated sharply, triggering a circuit breaker that halted trading in KOSPI-listed stocks for 20 minutes. According to reports, this marked the seventh activation of the circuit breaker mechanism this year alone — a frequency that underscores the extraordinary volatility gripping South Korean equities in 2025.

Tech Stocks Bear the Brunt

Technology shares led the decline. Market bellwether Samsung Electronics plunged 10.7 percent to 254,500 won, while chipmaking rival SK hynix plummeted 15.37 percent to 1,845,000 won. Analysts noted that SK hynix's sharp fall came despite a successful US market debut — the company's American depositary receipts (ADRs) on the Nasdaq had closed at US$168 each on Friday, well above the offering price of US$149. Investors reportedly rotated out of Seoul-listed SK hynix shares and into its ADRs, accelerating the domestic selloff.

Samsung Securities flagged in a research note that newly introduced single-stock leveraged exchange-traded funds linked to Samsung Electronics and SK hynix 'continued to fuel volatility in the stock market.' The leveraged ETF dynamic amplified directional moves, turning a profit-taking episode into a near-rout.

Beyond chipmakers, top carmaker Hyundai Motor fell 2.95 percent to 444,000 won, and defence conglomerate Hanwha Aerospace declined 3.21 percent to 936,000 won. Not all counters ended in the red: leading battery maker LG Energy Solution rose 0.77 percent, and refiner SK Innovation climbed 7.09 percent to 110,200 won.

Middle East Tensions Add to Pressure

Investor sentiment was further weighed down by escalating geopolitical uncertainty after the United States and Iran reportedly exchanged fresh strikes over the status of the Strait of Hormuz. The Strait is a critical global oil chokepoint, and any disruption there carries immediate implications for energy prices and supply chains — particularly for import-dependent economies like South Korea.

This comes amid a broader pattern of risk-off episodes this year, with the KOSPI circuit breaker having already been triggered six times before Monday's session. The convergence of domestic tech profit-taking, leveraged ETF volatility, and an external geopolitical shock created an unusually severe one-day drawdown.

Currency and Bond Markets React

The Korean won was quoted at 1,503.4 won per US dollar at 3:30 pm local time, down 2 won from the previous session. Bond yields rose as prices fell: the yield on three-year Treasury bonds climbed 4.1 basis points to 3.809 percent, while the five-year government bond yield rose 3.3 basis points to 4.041 percent.

Markets will be watching closely for any further developments in the Middle East, the trajectory of SK hynix ADRs on the Nasdaq, and whether leveraged ETF flows continue to amplify volatility in Seoul's technology-heavy index.