South Korea's KOSPI fell more than 4 percent to the 6,500 level, weighed down by weakness in heavyweight chip stocks such as Samsung Electronics and SK Hynix. The KOSDAQ also dropped more than 5 percent, triggering sell sidecar curbs in both markets.

The KOSPI closed down 304.33 points, or 4.46 percent, at 6,516.27, the Korea Exchange said on July 20. The index opened down 176.69 points, or 2.59 percent, at 6,643.58 and fell as low as the 6,400 level during the session.

In the main market, institutions were net sellers of 920.2 billion won, dragging the index down. Foreigners and retail investors were net buyers of 516.1 billion won and 349.4 billion won, respectively.

Most of the top market-cap stocks fell, led by large chipmakers.

Samsung Electronics closed at 244,000 won, down 11,000 won, or 4.31 percent, from the previous session. SK Hynix fell 78,000 won, or 4.23 percent, to 1,764,000 won.

Hyundai Motor dropped 6.12 percent and KB Financial fell 6.79 percent. Samsung Life plunged 8.91 percent. SK Square and LG Energy Solution fell 2.89 percent and 4.94 percent, respectively.

Losses in chip stocks spread to non-chip sectors such as autos, finance and secondary batteries, widening the index's decline.

At 11:21:26 a.m., a sell sidecar curb, which temporarily halts program sell orders, was triggered in the main market. At the time, KOSPI200 futures were down 5.13 percent at 1,040.00 from the previous session.

The KOSDAQ closed down 42.20 points, or 5.33 percent, at 749.64. A sell sidecar curb was also triggered in the KOSDAQ market at 10:52:54 a.m.

In the Seoul foreign exchange market, the won rose to 1,479.20 per dollar at the close, up 11.80 won from the previous session. The stronger won did not bring back investor sentiment in the domestic stock market.

The market sees risk-off sentiment widening as concerns about the chip business cycle combined with fatigue from recent sharp swings.

Kim Byeong-yeon (김병연), a director at NH Investment & Securities, said at a press briefing held at the Korea Exchange on the day that worries about the chip-cycle peak, geopolitical uncertainty and competition from Chinese artificial intelligence models were all reflected in the market.

Kim said the recent pullback was closer to an excessive price adjustment that had largely priced in major negative factors. He forecast that even if the KOSPI falls further, the 6,000 level could be a low where most major negatives are reflected.

He also analysed that foreign selling could recur and that profit-taking could increase if the index approaches the 8,500 level. He said the market could gradually regain stability after checking results from U.S. big tech companies.

Han Ji-young (한지영), a researcher at Kiwoom Securities, assessed that the slide across non-chip sectors as well created price appeal in some stocks.

Han said, "Earnings from non-chip sectors announced this week could act as a catalyst for rebounds in individual stocks," and added, "As the week progresses, rebound momentum by sector could differ."

Measures announced by the government to tighten rules on single-stock leveraged exchange-traded funds could also be a key variable in whether they reduce stock market volatility.

A halt to new product listings and an advertising ban take effect immediately, but key measures such as raising the basic deposit, strengthening tracking error thresholds and changing minimum trading units will be applied in phases from next month. As a result, the measures were seen as limited in immediately easing supply-and-demand volatility in the market on the day.

Still, the fact that total net asset value for single-stock leveraged ETFs tied to Samsung Electronics and SK Hynix fell from 16 trillion won at end-June to about 10 trillion won now could reduce the impact of future rebalancing.

Han said, "At present, the direction of the chip cycle and whether fundamentals recover are more important than leverage-driven supply and demand issues," adding, "There is a need to respond to the market with greater weight on corporate earnings announcements."