Asian Market Crash: A tremendous decline is being seen in the South Korean stock market today. This is the effect of large-scale selling of shares of chip manufacturing companies globally. Despite the easing of tensions between America and Iran and the fall in crude oil prices, the crisis in the tech sector completely sank the South Korean market today.

The benchmark Kospi fell 690.11 points or 10.22% to 6,065.64. When the index fell sharply soon after the market opened, investors got scared. During that time, to prevent panic selling, the South Korean stock exchange had to implement ‘sidecar’ trading ban and halted trading for a few minutes.

What are investors afraid of?

Big tech companies in the American stock market are increasing their spending on Artificial Intelligence (AI), while there are concerns in the minds of investors about lower profits. This is the reason why there was a big fall in the shares of semiconductor companies in the American stock market last night and today its effect was seen in the Korean markets.

Historic decline in Samsung and SK Hynix

Samsung and SK Hynix suffered the most losses due to huge selling in South Korea’s benchmark index Kospi due to profit booking by investors. Samsung shares have fallen by 10% today, while SK Hynix shares have also seen a huge fall of 12.4%. The entire index came down due to the collapse of the shares of these two giant chip companies, which account for more than half of South Korea’s economy and Kospi index.

Competition from Chinese companies is also the reason

The strength of Chinese chip makers in the global semiconductor market is increasing. On top of that, Chinese companies are also adopting an aggressive strategy of selling chips at low prices, which is threatening the profit margins of South Korean companies.

Recently, China’s largest chip manufacturing company Changxin Memory Technologies (CXMT) has entered the market in a spectacular manner. As soon as it was listed in the market yesterday i.e. on 27th July, its shares rose by almost 500%. At the same time, there were also reports that a Chinese government-backed company has started manufacturing immersion DUV lithography equipment. This is an advanced and complex technology for making semiconductor chips.

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