Korean stocks slide as chip rally unwinds

South Korean stocks fell sharply at the start of the week as investors unwound part of the prior session’s dramatic rebound. The Kospi Index dropped as much as 5.5% in early Monday trading, reversing some of Friday’s surge that had delivered a record one-day gain of 18%. The latest move came after a volatile stretch in which the index had fallen 17% over the three previous sessions before the rebound.

The sharp swings have unfolded against a backdrop of heavy trading in major semiconductor names that dominate the benchmark. Market participants pointed to profit-taking and the reduction of leverage-backed positions as key forces behind Monday’s declines, following the extraordinary gains seen late last week.

Heavyweight chipmakers Samsung Electronics and SK Hynix (SKHY) led the pullback as traders locked in recent profits. Both stocks fell by about 7–9% on Monday, giving back part of the outsized gains they had registered on Friday. Those earlier advances saw Samsung jump roughly 27% and SK Hynix (SKHY) about 30%, helping to drive the Kospi’s record daily rise.

The reversal in these large-cap technology names weighed heavily on the broader index and underscored how concentrated the recent volatility has been in AI- and semiconductor-linked shares. Headlines around advances in artificial intelligence and chips in other markets were cited as among the factors contributing to the shifting sentiment.

Trading data from Friday’s session showed a sharp contrast between foreign and domestic investor behavior. Foreign buying, widely seen as short covering, was a key driver of the 18% rebound in the Kospi. At the same time, retail investors sold a record amount of Kospi shares during that rally, highlighting their caution after the preceding selloff.

Despite Friday’s dramatic upswing, the index still ended July with a 22% monthly loss, marking its steepest decline since the global financial crisis. The sequence of a rapid three-day drop, a record one-day rebound, and the subsequent pullback has tested the risk tolerance of retail traders and underscored the market’s sensitivity to shifts in leverage and positioning.

The correction in South Korea’s market coincided with a pause in a broader emerging-market equity rebound. An MSCI (MSCI) index of developing-nation stocks slipped 1.1% after a 6.6% jump on Friday. The decline was led in part by South Korean chipmakers, whose retreat weighed on regional sentiment after their outsized contribution to the earlier rally.