On June 5th, stock markets in Japan and South Korea experienced a sharp and sudden decline, with the South Korean market triggering a circuit breaker.
The Korea Exchange activated its market-wide circuit breaker for the KOSPI index after the KOSPI 200 futures contract fell by 5%, leading to a five-minute halt in program trading. As of 8:23 AM local time, the benchmark KOSPI index was down more than 6%. Samsung Electronics Co Ltd shares fell over 6%, while SK hynix Inc shares tumbled more than 8%.
Japan's Nikkei 225 index plunged over 600 points, a decline exceeding 1%, with the TOPIX index and Nikkei 225 futures also showing sharp drops. Semiconductor stocks across the board were lower.
Year-to-date, the KOSPI index had surged approximately 105%, significantly outperforming other major global indices. The market has seen multiple reversals driven by speculative activity amidst unresolved geopolitical tensions in the Middle East. Analysts suggest that once the regional situation stabilizes and markets return to normalcy, investors are likely to re-evaluate stock valuations, potentially leading to a correction of what some perceive as irrational exuberance.
Some institutions are cautioning about the risk of a market pullback. A recent research report from Huafu Securities highlighted that the South Korean semiconductor materials supply chain is under pressure due to Middle East tensions and rising prices for Chinese raw materials. The price of anhydrous hydrogen fluoride has increased by around 40% this year. Companies including SoulBrain Co Ltd, ENF Technology Co Ltd, and Foosung Co Ltd have begun raising their procurement prices, with a new wave of price hikes anticipated for June and July. This cost pressure is expected to be passed on to downstream chip manufacturers such as Samsung Electronics and SK hynix.
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