South Korea's main stock index, the Kospi, closed at 6,035.35 on Tuesday, down 5.46%, according to the Korea Exchange, the Seoul Economic Daily reported. It was the lowest close since July 30. During the day, the index fell more than 7%, to as low as 5,911.

Foreign investors drove the drop. They sold a net 4.52 trillion won of shares, about $3.1 billion, on the main board. Individual and institutional investors bought shares but could not stop the slide. An automatic pause on program selling, called a sidecar, kicked in at 9:47 a.m.

Chipmakers led the losses. Samsung Electronics fell 7.39% and SK hynix tumbled 10.09%. SK Square dropped 12.91%.

Two things hit chip shares. China's ChangXin Memory Technologies, or CXMT, said it would unveil a next-generation server memory product this year. And Broadcom's chief executive spoke about the huge cost of building AI systems, said Lim Jung-eun, an analyst at KB Securities. U.S. chip stocks fell Monday, with Micron down 3.9%, The Korea Herald reported.

Some analysts see a deeper problem. Heo Jae-hwan of Eugene Investment & Securities said foreign selling in Korea was more than three times as intense as in Taiwan, relative to market size. "The outflows are too large to be attributed solely to portfolio rebalancing after the rally," he told The Korea Herald.

The Kospi has lost more than 1,000 points in five trading days after sitting above 7,000. Even so, it was still up 51% for the year as of Monday's close. Korea's market leans heavily on memory chipmakers, which makes it more exposed to swings in chip sentiment, the Herald noted.

Elsewhere in Asia, Japan's benchmark index fell 2.5% and Taiwan's Taiex fell 1.9%, the AP reported. Investors are also watching big U.S. bank earnings this week.

What we know: The Kospi fell 5.46% on heavy foreign selling, led by steep drops in Samsung Electronics and SK hynix.
What we don't: Whether foreign investors will keep pulling money out of Korean stocks.