South Korean stocks tumble after chip rout and Bank of Korea rate hike
The Bank of Korea's first hike since 2023 rattles equity markets and raises questions about risk appetite across the region
South Korea’s stock market plunged as renewed weakness in global semiconductor stocks and the Bank of Korea’s benchmark interest rate hike weighed heavily on investor sentiment.
The KOSPI fell by more than 6% during Thursday trading, triggering a sell-side circuit breaker, while the KOSDAQ also activated market safeguards after dropping more than 4%.
Chipmakers led the decline, with Samsung Electronics and SK Hynix recording steep losses following an overnight slide in US semiconductor stocks driven by concerns over slowing AI infrastructure investments.
Although retail investors stepped in with strong bargain buying, continued selling by foreign and institutional investors kept pressure on the market as traders assessed the impact of higher interest rates and the outlook for the semiconductor sector.
Bank of Korea raises interest rates for the first time in three and a half years
The Bank of Korea increased its benchmark interest rate by 25 basis points to 2.75%, ending a three-and-a-half-year pause as policymakers responded to accelerating economic growth, persistent inflation and a weaker won.
Macro, rates, and crypto—what moved markets and what matters next.
Daily. Free. Join 34,000+ readers across crypto, finance, and policy.
The central bank expects the economy to grow faster than previously forecast, supported by a strong recovery in semiconductor exports, while warning that inflationary pressures are likely to remain elevated.
The rate hike was widely anticipated by markets, and the central bank indicated that further policy tightening may be needed to maintain price stability.
Governor Shin Hyun Song highlighted upcoming GDP and inflation data as key indicators for future decisions, with market expectations pointing to at least one additional rate increase before the end of the year.