The KOSPI plunged nearly 4% on September 2, sliding to the low 6,500 range. The selloff came as foreign and institutional investors dumped shares after the U.S. resumed airstrikes on Iran, triggering a simultaneous surge in international oil prices and U.S. long-term Treasury yields.
On the Korea Exchange, the KOSPI closed down 3.99% at 6,562.72 from the previous session. The index opened 3.08% lower at 6,625.47 and briefly pared losses to the 6,666 level in early trading, but selling pressure intensified in the afternoon, with the index finishing near its intraday low. The KOSDAQ also fell 2.1% to close at 803.98, extending its losing streak to three consecutive sessions.
By investor type, foreign investors sold a net 1.9094 trillion won (approximately $1.4 billion) and institutions offloaded 2.0434 trillion won (approximately $1.5 billion) on the main KOSPI board. Retail investors bought a net 2.3023 trillion won (approximately $1.7 billion) in a defensive move, but it proved insufficient. On the KOSDAQ market, foreign and retail investors bought 61.7 billion won (approximately $45.2 million) and 172.7 billion won (approximately $126.6 million) respectively, while institutions sold 232 billion won (approximately $170.1 million).
Most large-cap stocks declined. South Korea’s Samsung Electronics (005930.KS) and SK Hynix (000660.KS) fell 4% and 4.7%, respectively. POSCO Future M plunged 8%, while SK Square (-7.9%), HD Hyundai Electric (-7.5%), Doosan (-7%), SK Inc. (-7%), HD Hyundai Heavy Industries (-6.8%), and HD Korea Shipbuilding & Offshore Engineering (-6.7%) also posted steep losses. Meritz Financial Group (3.5%) was among the few gainers.
The direct catalyst for the selloff was the spread of Middle East-driven risk aversion. On September 1 (local time), the U.S. Central Command launched airstrikes targeting Islamic Revolutionary Guard Corps (IRGC) assets, heightening concerns over crude oil supply disruptions. October-delivery West Texas Intermediate (WTI) crude futures closed up 5.2% at $90.22 per barrel, while November-delivery Brent crude rose 4.6% to $94.65 per barrel.
The oil price spike fueled inflation concerns that spilled over into bond markets. The U.S. 10-year Treasury yield reached 4.8% intraday, its highest level since early 2025, while the 30-year yield climbed to 5.272%, approaching its highest since 2007. Japan’s 10-year government bond yield breached 3% intraday, marking its highest level in roughly 30 years since October 1996. The U.K. 30-year gilt yield also rose to 5.919%, its highest since 1998.
Overnight, all three major U.S. stock indexes fell. The Dow Jones Industrial Average closed down 0.79% at 52,766.88, the S&P 500 fell 0.71% to 7,631.47, and the Nasdaq Composite dropped 1.03% to 26,099.77. The Philadelphia Semiconductor Index, which is closely correlated with South Korean chip stocks, also declined 2.14%.
In the Seoul foreign exchange market, the dollar-won exchange rate opened 3.1 won higher at 1,373.5 won, then retreated to 1,366 won in the afternoon amid heightened volatility. The won had recently fallen to the 1,360 range, its lowest in 13 months, prompting bargain-hunting demand for dollars. While expectations of oil-driven won weakness persist, easing dollar strength and wariness over potential Japanese intervention capped the upside.
Market attention focused on how much foreign selling the buyback programs at Samsung Electronics and SK Hynix could absorb. According to Kiwoom Securities, Samsung Electronics has executed approximately 3.6 trillion won (approximately $2.6 billion) of its announced 15 trillion won (approximately $11.0 billion) buyback, while SK Hynix has deployed about 9.7 trillion won (approximately $7.1 billion) of its 40 trillion won (approximately $29.3 billion) program. At the current pace, both companies’ buybacks are expected to continue through October 8 and October 16, respectively.
From August 3 through the previous session, foreign investors sold a net 10.6672 trillion won (approximately $7.8 billion) and institutions offloaded 5.6928 trillion won (approximately $4.2 billion) on the KOSPI market. In contrast, Other Corporations bought a net 13.6601 trillion won (approximately $10.0 billion), the bulk of which represents buyback purchases by Samsung Electronics and SK Hynix. With buybacks supporting supply-demand dynamics, the KOSPI rose 3.64% during that period.
However, on this day, Middle East-driven risk aversion overwhelmed the market’s existing defenses. With foreign and institutional investors each selling over 1 trillion won (approximately $733.1 million) net, Samsung Electronics and SK Hynix both fell 3-4%, putting the defensive capacity of their buyback programs to the test.
Robust semiconductor exports are viewed as a factor supporting a medium-term floor for stock prices. August semiconductor exports surged 209.0% year-over-year, accelerating from July’s 178.0% growth. Artificial intelligence (AI) infrastructure investment and improving memory market conditions are translating into actual export growth, suggesting that chip stocks’ earnings fundamentals remain intact despite external headwinds.
That said, analysts caution that if oil prices and U.S. Treasury yields remain elevated for an extended period and foreign selling intensifies, buybacks alone will struggle to absorb the supply. Conversely, if Middle East tensions ease and foreign selling subsides, the remaining buyback capacity and strong exports could serve as a foundation for a stock market rebound.
Lee Kyung-min, an analyst at Daishin Securities, said, “As risk aversion expanded amid rising sovereign bond yields and international oil prices, foreign and institutional investors sold in tandem, pushing the index below the 6,600 level in a bearish trend.”
Han Ji-young, an analyst at Kiwoom Securities, noted, “Considering that export growth can remain at elevated levels even if the growth rate slows, downside rigidity in the stock market centered on key sectors should hold despite macro uncertainty.”