South Korea's KOSPI crashes 10%, triggers domino effect across Asian markets; Nikkei falls 3%, Taiwan retreats, Nifty down ~1%

Asian equities fell sharply on Tuesday, with South Korea's benchmark KOSPI plunging nearly 10% and triggering market-wide trading curbs, as a selloff in technology and semiconductor stocks spread across the region following weakness on Wall Street.

The KOSPI index fell 910.71 points to close at 8,203.84, rapidly deflating an AI and semiconductor-led bull run that had pushed the index past the historic 9,000 mark just days prior. The steep decline triggered an emergency market-wide 20-minute circuit breaker at 2:33 p.m. local time after the index crossed the 8% downward threshold.

The fall comes as investors dumped heavyweight chipmakers Samsung Electronics and SK Hynix, which have been the key drivers of South Korea's AI-led market rally. SK Hynix settled 12.47% lower at 2,555,000 KRW, while Samsung Electronics collapsed 12.31% to settle at 310,000 KRW.

Regional domino effect

In Tokyo, Japan’s Nikkei 225 tumbled 3.6% to close near 71,681. The KOSPI's distress prompted international funds to aggressively lock in profits on Japanese semiconductor equipment giants like Tokyo Electron and Advantest, which had powered the Nikkei's 43% year-to-date advance.

Taiwan's benchmark index also retreated from recent record highs as investors booked profits in technology counters, though losses were relatively contained compared with South Korea due to support from heavyweight chipmaker TSMC. Hong Kong's Hang Seng Index slipped 0.4% to 23,678 under the weight of regional risk-off sentiment.

Meanwhile, India’s Nifty 50 faced collateral pressure as foreign institutional investors (FIIs) temporarily paused emerging market allocations. As of 1:45 pm IST, the benchmark Nifty 50 was trading 214.80 points or 0.89% lower at 23,888.10, while the 30-share S&P BSE Sensex was trading 639.70 points lower at 76,454.37.

Wall Street weakness sets the tone

The weakness in Asia followed a mixed session on Wall Street overnight, where investors rotated out of major technology stocks amid concerns over rising AI spending and stretched valuations.

The Nasdaq Composite fell 1.3% on Monday, while the S&P 500 lost 0.4%. Alphabet fell 6%, Amazon lost nearly 5%, while Meta Platforms and Microsoft declined about 3% each. Although Micron Technology gained after announcing a strategic partnership with AI startup Anthropic, the broader mood remained cautious as investors reduced exposure to growth-oriented technology names.

The broader correction in semiconductor stocks traces back to last week's selloff after stronger-than-expected US labour market data boosted expectations of further Federal Reserve tightening. The data pushed Treasury yields higher and sparked a sharp decline in technology shares globally. Earlier this month, the Philadelphia Semiconductor Index had recorded its biggest single-day decline since 2020 after investors reassessed growth expectations for the AI sector.