KOSPI tumbled 10% as global stocks, gold and crypto fell on overlapping pressures

South Korea and chip stocks at the center of the sell-off

One of the earliest and most visible points of decline emerged in South Korea. The KOSPI index plunged 10% intraday, activating circuit breakers for the second time this month. Shares of leading chipmakers Samsung and SK Hynix both slumped more than 12% in that session.

According to local media, SK Hynix is slowing capacity expansion at its new chip line and shifting focus to lower-cost, standard chips to offset a shortfall in revenue. This move signals a downward revision of demand expectations for the company, which is a key player in AI-related memory markets.

Local reports indicated that SK Hynix is scaling back expansion of its new chip facility and turning to lower-priced chips to address a revenue gap.

Korean investors were known to have taken large leveraged positions in chip stocks in recent months. Regulators had also warned that the sector’s rally was becoming overheated before the downturn began. This dynamic likely fueled forced position closures in the wake of the initial sell-off.

Fed expectations dampen risk appetite

Another factor weighing on markets was the U.S. Federal Reserve. Of its 19 policymakers, nine now anticipate at least one rate increase this year. Current market pricing gives a 70% chance of a rate hike by September. The outlook for higher rates raises the cost of holding riskier assets, including equities and cryptocurrencies.

Bull Theory noted that the onset of selling triggered additional liquidations of leveraged positions, pushing the move well beyond a conventional correction and activating circuit breakers.

Quarter-end rebalancing and yen trades shake markets

JPMorgan cautioned that as part of global portfolio rebalancing at quarter-end, forced equity sales could reach as much as $165 billion. The bank said large pension and sovereign wealth funds are trimming stock and bond exposures to return to target allocations, with this window likely to remain open until June 30.

Additionally, wild swings in the dollar-yen pair the previous day led to speculation that Japan had intervened to defend the yen. Such moves may disrupt “yen carry trades,” a strategy where investors borrow cheaply in yen to invest in global equities and risk assets.

Mini glossary: A yen carry trade involves borrowing in low-interest Japanese yen to invest in higher-yielding assets elsewhere. When these trades unwind, simultaneous selling can hit multiple markets at once.

Analysts say the unwinding of carry trades may explain the parallel declines in diverse assets such as gold, silver, and stocks—markets not directly linked in other ways. On Wall Street, the Nasdaq closed yesterday down 2.33%, while futures indicated a further loss of around 2.5% at the start of the next session.

Losses deepen across US tech giants

Looking at specific companies, Alphabet lost 5% after reports of talent departures in its artificial intelligence teams. SpaceX slid 16% over three sessions, dropping from $176 to $154. Other major players including Amazon, Meta, and Microsoft also saw losses as part of the broader sell-off.