South Korea's KOSPI index slid 2% amid a global bond rout, with higher yields undercutting the AI-fueled rally and pushing the benchmark toward correction territory.
The US 10-year yield surged 8 basis points to 4.60%, extending its climb as robust economic data fueled expectations that the Federal Reserve will hold rates higher for longer. This bond market move directly undermined risk appetite, hitting equities from Seoul to New York.
A combination of stronger-than-expected US services sector activity and hawkish-leaning Fed meeting minutes pushed yields higher as markets priced out near-term rate cuts.
Technically, 4.60% is a key level; a break above 4.75% could target 5.00%, last seen in 2023. However, such a move would likely trigger further equity market turmoil.
The KOSPI fell 2% to 3,100, extending its decline from a May peak to 9.8% as a spike in US 10-year yields to 4.60% crushed risk appetite. Korean tech stocks, which had rallied on AI optimism, bore the brunt of selling, with Samsung Electronics and SK Hynix each down over 3%.
The index closed at 3,100, down 9.8% from its May 2026 record high of 3,436. A further drop of 0.2 percentage points would mark an official 10% correction.
Rising US bond yields have flipped the risk-reward calculus for equity investors. Higher yields reduce the present value of future earnings, hitting the technology and growth stocks that dominate the KOSPI. Foreign selling also accelerated.
Semiconductors took the hardest hit, with the sub-index falling 3.5%. The sector's high valuations and sensitivity to global trade and AI demand make it vulnerable to yield-induced corrections.
Taiwan Semiconductor Manufacturing (TSM) fell 2.5% in US trading as the AI chipmaker faced contagion from the Korean tech rout. TSM, a bellwether for AI infrastructure demand, is sensitive to yield-driven valuation pressures and the broader risk-off shift that slammed Asian equities.
As a leading AI chipmaker, TSM is tightly linked to the same AI thematic trade that drove Korean chip stocks like Samsung and SK Hynix. The yield shock that triggered profit-taking in Seoul extended to TSM as investors reevaluated AI exposure.
Near-term, TSM faces headwinds from macro rate sensitivity and potential selling in global tech. However, its strong order book from high-performance computing and AI could limit downside if earnings prove resilient.
NDX futures declined 1.2% in after-hours trading as the spike in US yields that pummeled Korean AI stocks raised fears of a broader repricing across global tech. A higher discount rate environment disproportionately hurts long-duration growth assets like the tech-heavy Nasdaq-100.
Tech stocks have high sensitivity to interest rates because their value rests heavily on future earnings. When yields climb, those future cash flows are discounted more steeply, compressing valuations.
The NDX is down about 4% from its peak, less than the KOSPI's near-10% decline. However, if yields continue to rise, a deeper pullback is possible, with technical support around 14,500.
The KOSPI fell 2% on Monday, extending its decline from a recent peak to 9.8%, just shy of a 10% correction. A spike in the US 10-year Treasury yield to 4.60% sapped demand for risk assets, hitting Korean tech stocks that had led an AI-driven surge. Foreign investors sold a net $500 million of local equities, with semiconductor giants Samsung Electronics and SK Hynix leading losses.
The KOSPI slid 2% as a surge in US 10-year Treasury yields to 4.60% reduced the attractiveness of risk assets, prompting a selloff in Korean tech stocks that had benefited from an AI-driven rally. The index is now within 0.2 percentage points of a 10% correction.
Higher US yields increase the discount rate used to value future earnings, making high-growth technology stocks—which dominate the Korean market—less appealing. Additionally, rising yields often attract capital flows back to the US, putting pressure on emerging market assets.
The AI rally is threatened but not necessarily over. Monday's moves reflect a broader risk-off sentiment sparked by bond market moves. If AI-related earnings continue to beat estimates, the rally could resume, but the near-term technical picture has deteriorated.