Korean Stocks Approach Correction as Higher Yields Deter Risk Appetite

South Korea's Kospi Index Falls as Rising Bond Yields Threaten AI-Driven Stock Rally

The South Korea benchmark Kospi index tumbled as much as 4.7% on Monday shortly after the opening bell, extending its drop to more than 10% from the May 14 peak and briefly entering correction territory. The Korea Exchange briefly halted Kospi program selling on Monday after a sharp futures slump. The benchmark has since clawed back some of those early losses and is down about 3%.

The latest swings highlighted once again the fragility of the world-beating stock rally. The intraday gyration of 5% or more has increasingly become more common in the South Korean stock market as the torrid surge took the index to jump from 7,000 to 8,000 in just seven sessions.

The decline in the Kospi index is attributed to rising interest rates and the ongoing labor strike at Samsung Electronics, the world's biggest memory chipmaker. Samsung Electronics Co. and its largest labor union are set to resume negotiations on Monday to avert a strike that the nation's prime minister warned could wreak havoc on the economy.

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Note: Due to the lack of specific numbers for Samsung Electronics Co. in the original text, the table is incomplete.

Ha SeokKeun, chief investment officer at Eugene Asset Management, described the latest decline as "a natural pullback" following the index's sharp rally over the past month. According to Ha, the immediate triggers were rising interest rates and the labor strike at Samsung Electronics. However, they do not see this as the beginning of a structural downtrend, but rather a healthy price correction. In fact, they believe attractive buying opportunities in high-quality stocks are emerging again.