Just minutes after trading began, the KOSPI fell 5.30 percent to 7,862.92 and the junior KOSDAQ also dropped 4 percent to 892.18.
A sharp decline in U.S. chipmakers spilled over into Seoul, with semiconductor-related stocks bearing the brunt of the selling after the Philadelphia Semiconductor Index tumbled 6.27 percent.
Samsung Electronics tumbled 7 percent to 292,500 won, SK hynix plunged 8.28 percent to 2.348 million won, SK Square slid 10.13 percent to 1.579 million won and Samsung Electro-Mechanics dropped 8.62 percent to 2.015 million won.
Selling spread to other blue chip stocks. Samsung C&T fell 7.95 percent to 399,500 won, Samsung Life Insurance lost 8.27 percent to 355,000 won, Hyundai Motor declined 5.03 percent to 463,000 won, Samsung Electronics preferred shares slipped 6.36 percent to 191,500 won, while LG Energy Solution and Samsung Biologics edged down 1.87 percent and 1.43 percent to 341,500 won and 1.376 million won, respectively.
Only a handful of blue chips bucked the broader decline. Hanwha Aerospace rose 4.49 percent to 1.14 million won, while KB Financial gained 0.88 percent to 159,900 won.
The weakness would mean a rough start to the second half, as the KOSPI briefly reclaimed 8,600 before reversing course, slipping below 8,100 to finish at 8,303.41 the previous day amid persistent foreign selling.
Wall Street provided little relief overnight. The Dow Jones Industrial Average slipped 0.03 percent, the S&P 500 fell 0.22 percent and the Nasdaq Composite lost 0.66 percent as investors locked in profits at the start of the third quarter. Semiconductor stocks bore the brunt of the selling, with Micron Technology plunging 10.57 percent, Sandisk dropping 10.62 percent, Intel falling 9.03 percent, AMD losing 6.89 percent and Nvidia declining 1.25 percent.
The notable exception was Meta Platforms, which surged 8.81 percent after unveiling plans to commercialize excess AI computing capacity through cloud services. However, the announcement also fueled concerns that major technology companies may have overinvested in AI infrastructure and could reduce future demand for advanced semiconductors.
Investors are now turning their attention to upcoming developments as Samsung Electronics is set to release its preliminary earnings report for the second quarter next week, while SK Hynix is set for its U.S. ADR listing this month. Earnings reports for the so-called "Magnificent Seven" — Alphabet, Amazon, Apple, Microsoft, Nvidia, Meta, and Tesla — will also be released later this month.
Meanwhile, the South Korean won weakened against the U.S. dollar, with the greenback trading at 1,555.7 won in early trading, compared with the previous day's close of 1,554.9 won.
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