Seoul Shares End Five-Day Rally on Profit-Taking, Mideast Uncertainty

SEOUL — South Korean stocks fell by more than 2 percent on Tuesday, snapping their five-day winning streak, as investors moved to lock in gains after a record-breaking run and amid an impasse in peace negotiations between the United States and Iran. The local currency also fell sharply against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) dropped 179.09 points, or 2.29 percent, to close at 7,643.15. The index had risen as high as 7,999.67 shortly after the opening bell, nearing the unprecedented 8,000-point mark, before reversing course. It fell as low as 7,423.11 during the session.

Trade volume was heavy, with 1.02 million shares worth 66.6 trillion won (US$44.8 billion) changing hands. Losers outnumbered winners 731 to 145, according to Yonhap News Agency.

Foreign investors unloaded local shares worth a net 5.6 trillion won, marking their fourth consecutive day of selling, while institutions dumped 1.2 trillion won. Retail investors, however, scooped up 6.68 trillion won.

Rally Pauses After Record Run

The KOSPI had surged to an all-time high of 7,822.24 on Monday, closing above the 7,800 threshold for the first time in history, driven by an extended rally in big-cap technology shares such as Samsung Electronics and SK hynix, fueled by artificial intelligence (AI) optimism. The index had risen 6.5 percent a day earlier to breach the 7,000-point mark for the first time and close at 7,384.56.

Tuesday's retreat came as investors took profits and hopes for a swift end to the U.S.-Israeli war against Iran faded. An earlier report, dated May 7, noted that Washington and Tehran had exchanged a fresh proposal to end the war, with U.S. President Donald Trump saying a deal could be reached before his trip to Beijing the following week. That optimism had supported the market's surge, but by Tuesday, the ceasefire appeared increasingly fragile.

Middle East Tensions Resurface

Earlier in the day, Trump said he is considering renewing \"Project Freedom,\" an initiative aimed at helping guide stranded vessels through the Strait of Hormuz amid the ongoing U.S.-Israeli war against Iran. He also said the ceasefire with Iran was on \"massive life support,\" while calling Iran's peace offer a \"piece of garbage.\"

The remarks highlighted the precarious state of diplomatic efforts and dampened investor sentiment.

Key Stocks and Analyst Views

After starting 0.7 percent higher, market bellwether Samsung Electronics turned lower, losing 2.45 percent. Its chipmaking rival SK hynix trimmed earlier gains, rising 1.06 percent as of 11:20 a.m. on Tuesday.

Leading battery maker LG Energy Solution plunged 5.61 percent, and its smaller rival Samsung SDI nosedived 7.16 percent. AI investment firm SK Square dipped 3.62 percent. Auto giant Hyundai Motor shed 0.98 percent, while its sister company Kia slipped 4.01 percent. Power plant manufacturer Doosan Enerbility dropped 1.48 percent, and defense giant Hanwha Aerospace went down 1.75 percent.

Lee Kyoung-min, an analyst at Daishin Securities, attributed the pullback to profit-taking after the recent rally, noting that the KOSPI's gains had been largely driven by strong performance in large-cap semiconductor stocks. He also pointed to sharp falls in blue-chip U.S. tech shares, including Micron and SanDisk, during after-hours trading.

Comments from Seoul's presidential policy chief Kim Yong-beom on profit sharing of tech companies in the AI era also weighed on investor sentiment. \"The fruits from the AI infrastructure era are not generated by only a handful of companies,\" Kim wrote on social media, proposing a \"national dividend system.\"

The Korean won fell sharply against the U.S. dollar, though specific figures were not provided in the available reports.