KOSPI Falls for Second Day as Foreign Selling and Soaring US Treasury Yields Keep Seoul Stocks Below 7,000

SEOUL, South Korea — South Korean stocks edged lower for a second straight session on Tuesday, as persistent foreign selling, surging U.S. Treasury yields and high oil prices kept the benchmark index below the closely watched 7,000 mark.

The Korea Composite Stock Price Index, or KOSPI, closed at 6,870.81, down 18.93 points, or 0.27%, from Monday's close of 6,889.74, according to the Korea Exchange.

The decline was far smaller than Monday's steep drop, as the index recovered some of its early losses during the session. The KOSPI opened 45.33 points, or 0.66%, lower at 6,844.41 before bargain hunters stepped in to trim the losses.

Foreign investors keep selling

Foreign investors were heavy sellers again on Tuesday. They sold a net 192.9 billion won ($141 million) worth of shares on the main board immediately after the market opened, while individual and institutional investors were net buyers.

By late morning, foreign investors had sold more than 1 trillion won ($762 million) worth of shares, weighing on the index even as some chip stocks recovered.

The selling followed a sharp sell-off on Monday, the first trading day after the Chuseok harvest holiday. The KOSPI tumbled 2.70% that day to close below 7,000 for the first time in four sessions, as foreign investors sold a net 3.24 trillion won and institutions sold 1.02 trillion won.

US yields and oil weigh on sentiment

Market sentiment was weighed down by a surge in U.S. borrowing costs and rising oil prices after talks between Washington and Tehran stalled.

The United States rejected an Iranian proposal overnight that included reopening the Strait of Hormuz, sending oil prices and Treasury yields higher. The yield on the 10-year U.S. Treasury note rose to about 5.24%, its highest level since 2007, as traders increased bets that the Federal Reserve will raise interest rates again in October.

Higher U.S. yields tend to draw investment away from emerging markets such as South Korea and put pressure on the won. South Korea's three-year government bond yield also climbed above 4.1% on Tuesday, tracking the surge in U.S. rates.

Wall Street offered little support. The Dow Jones Industrial Average fell 0.67% overnight, the S&P 500 lost 0.77% and the Nasdaq Composite dropped 0.92%.

Chip stocks under pressure

Technology stocks remained in focus after reports that OpenAI had temporarily paused training of its newest artificial intelligence model for safety checks, which hurt sentiment toward chipmakers globally.

Nvidia rose 1.68% overnight after announcing a record 150 billion-dollar share buyback authorization, but most other chip stocks fell. AMD dropped 3.61%, Qualcomm fell 7.17% and Intel lost 5.67%, while SK hynix's American depositary receipts slid 5.03%.

In Seoul, Samsung Electronics, the country's most valuable company, traded lower in early trading on its ex-dividend date. Market watchers said financial investment firms could unwind arbitrage positions they had built ahead of the dividend cutoff, adding selling pressure to the stock.

According to Eugene Investment & Securities, financial firms bought a net 2.8 trillion won of KOSPI 200 stocks in the week before the ex-dividend date, including 1.6 trillion won of Samsung Electronics shares alone, while selling 3.5 trillion won of index futures.

SK hynix bucked the early trend, edging higher at the open to 1.772 million won after falling 5.05% on Monday. Samsung Electronics had dropped 5.43% in Monday's session.

Other large-cap stocks traded lower early Tuesday, including LG Energy Solution, Samsung Life Insurance, Samsung Electro-Mechanics, Samsung Biologics and Hyundai Motor.

Analysts expected bargain hunting

Before the session, analysts had predicted volatility but also said the market could recover some ground after Monday's steep decline.

"Today the market could see volatility spilling over from Samsung Electronics' ex-dividend date and from macro factors," said Han Ji-young, an analyst at Kiwoom Securities, according to the Seoul Economic Daily. "But with the OpenAI news already priced in the previous session, the index is likely to recoup some of its losses during the session as bargain hunting emerges on the view that the decline has been excessive."

The smaller loss on Tuesday suggested that some investors viewed Monday's selloff as overdone.

KOSDAQ also lower

The tech-heavy KOSDAQ index also struggled. It opened 0.32% lower at 843.87 and finished the session in negative territory, as investors reduced exposure to growth stocks amid higher borrowing costs.

Strong year despite recent volatility

Despite the recent pullback, the KOSPI remains near historic highs after a powerful rally this year driven largely by booming demand for memory chips used in artificial intelligence systems.

Samsung Electronics and SK hynix have been the main drivers of that rally, as global technology companies race to secure high-bandwidth memory chips for AI data centers. Samsung is expected to post more than 100 trillion won in third-quarter operating profit, and business sentiment in the semiconductor sector has reached record levels.

In a sign of continued investment in the sector, Samsung Electro-Mechanics said it plans to invest 6.78 trillion won in substrates for AI chips.

The market has also been supported by government efforts to improve corporate governance and shareholder returns, along with strong economic forecasts. The Organization for Economic Cooperation and Development recently raised its forecast for South Korea's 2026 economic growth to 3.7%.

But the index has proven volatile. It has suffered several sharp drops this year as investors grew nervous about the sustainability of the AI boom, rising global interest rates and geopolitical tensions in the Middle East.

Investors will be watching for developments in U.S.-Iran talks, movements in global bond markets and signals from the Federal Reserve on the path of U.S. interest rates. Upcoming U.S. economic data, including Friday's jobs report, could also shape expectations for another Fed rate increase.

In South Korea, attention will turn to third-quarter earnings from major chipmakers, which are expected to show strong profit growth on continued AI demand. Foreign investor flows are also likely to remain a key driver of the market in the coming sessions.