Japan and South Korea Stocks Plunge as Kospi Slumps Nearly 6%, SK Hynix Drops Nearly 10%, Kioxia Plummets Over 12%

TradingKey - On August 19, Japanese and South Korean stock markets faced a new round of sell-offs. South Korea's KOSPI Index closed down 5.80% at 6,471.17 points, while Japan's Nikkei 225 Index fell 3.16% to 65,326.42 points, marking a second consecutive day of decline and hitting its lowest closing level in nearly two weeks.

The downturn in the South Korean market was particularly severe during early trading, with the KOSPI falling more than 6% shortly after the open. The Korea Exchange triggered its sidecar mechanism, halting KOSPI program sell orders for 5 minutes to cope with the unusual volatility.

Source: TradingView

Heavyweight semiconductor and tech stocks bore the brunt of the pullback, with Samsung Electronics falling 7.82% to 247,500 won (about $177), and SK Hynix plunging 9.75% to 1,500,000 won.

Japanese tech stocks also posted sharp declines. Kioxia tumbled 12.60% to close at 49,950 yen (about $314), while SoftBank Group dropped 10.34% to 5,227 yen, as capital broadly fled AI and memory supply chain stocks.

A key factor behind this market correction was the rapid surge in global bond yields. The 30-year U.S. Treasury yield briefly climbed near its highest level since 2007, while the 10-year U.S. Treasury yield also hovered at a relatively high level not seen since early 2025.

As risk-free interest rates rose, markets began re-evaluating the pricing of high-valuation tech stocks. Companies requiring continuous massive investments to build out AI infrastructure drew heightened scrutiny regarding their future financing costs and ability to deliver earnings.

Semiconductor companies are particularly sensitive to this trend. Because chipmakers' earnings expectations are often pegged to demand growth over the coming years, rising interest rates further compress their valuation multiples.

Meanwhile, tensions in the Middle East continued to weigh on the market. The U.S. and Iran remained in a stalemate over follow-up solutions, while shipping security in the Strait of Hormuz stayed under close watch. Driven by investor concerns over potential energy supply disruptions, international crude oil prices rose for a third consecutive trading day. A further increase in energy prices could reignite global inflation and narrow the policy space for major central banks to cut interest rates in the future, dealing another blow to high-valuation tech assets.

Jung In Yun, Global CEO of Fibonacci Asset Management, noted that while the long-term growth trend of AI remains intact, rising interest rates and geopolitical risks are dampening investors' willingness to pay high valuation premiums for high-growth assets. He added that alongside macroeconomic factors, the recent stock price declines also reflected profit-taking by investors following previous significant gains.