Asian stocks fell Thursday as renewed selling in semiconductor companies drove South Korea’s benchmark index sharply lower, reversing much of the previous session’s rebound after the country’s central bank raised interest rates for the first time in more than three years.
The Kospi dropped about 7%, with SK Hynix and Samsung Electronics among the biggest weights on the market. The decline followed a volatile week for South Korean technology shares after investors rapidly unwound positions that had benefited from expectations of sustained demand for artificial-intelligence memory chips.
The selloff came one day after the Kospi surged more than 6% as softer U.S. inflation data encouraged investors to return to riskier assets. That rebound proved short-lived after the Bank of Korea raised its seven-day repurchase rate by 25 basis points to 2.75%, its first increase since January 2023.
The central bank had held its benchmark rate at 2.50% since May 2025. Policymakers moved after inflation accelerated to 3.2% in June, above the bank’s 2% target, while a weaker won, elevated household debt and rising housing prices added pressure for tighter monetary policy.
South Korea’s economy has remained supported by strong semiconductor exports, giving the central bank room to raise rates despite uncertainty surrounding global growth. Exports increased more than 70% from a year earlier in June, led by demand for advanced chips used in artificial-intelligence data centers and high-performance computing.
The government recently raised its 2026 economic-growth forecast to 3%, reflecting the strength of the semiconductor industry and domestic fiscal spending. That expansion, however, has also contributed to higher wages, stronger consumer demand and renewed inflation concerns.
Chip shares have become the center of South Korea’s market volatility. SK Hynix, one of the world’s largest producers of high-bandwidth memory, has experienced unusually large price swings since completing its U.S. listing. The company’s American depositary receipts initially rallied after their Nasdaq debut, while its Seoul-traded shares later suffered their steepest one-day decline in years as investors took profits and reduced leveraged positions.
Samsung Electronics has been caught in the same rotation. Both companies had risen sharply during the past year as investors increased exposure to businesses supplying memory for artificial-intelligence processors. Their size within the Kospi means large changes in either stock can move the entire South Korean market.
The latest decline also followed weakness in U.S. semiconductor and computer-hardware shares. Dell Technologies, Micron Technology, Sandisk and other companies tied to memory, servers and artificial-intelligence infrastructure fell Wednesday, even as gains in Apple and other large technology companies helped the broader U.S. indexes finish higher.
Investors have become more selective across the artificial-intelligence trade after a period in which chipmakers, memory producers, server manufacturers and data-center suppliers climbed together. Concerns about stretched valuations, future production capacity and the timing of returns from large AI investments have produced wider differences between individual companies.
South Korea’s rate increase placed additional pressure on richly valued growth shares because higher borrowing costs reduce the present value investors assign to future earnings. The decision also strengthened the won modestly, with the currency trading near 1,486 per dollar, after losing more than 4% during 2026.
The Bank of Korea is balancing the strength of the export economy against inflation, household borrowing and currency weakness. The country continues to post large current-account surpluses, but capital outflows and demand for foreign assets have limited support for the won.
Markets are now assessing whether Thursday’s decline represents another temporary reversal in an increasingly volatile semiconductor trade or the beginning of a broader reduction in exposure to South Korean technology shares.
Demand for advanced memory remains strong, and the country’s chip exports continue to grow rapidly. The immediate market concern is no longer whether artificial-intelligence spending exists, but whether the earnings expected from that spending can keep pace with the sharp rise in share prices.
JBizNews Desk | Seoul
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