Korean Stocks Drop 5% as Chip Slump Fuels Overheating Concerns

Supercharged gains in a handful of companies and weak market breadth are stoking concerns that the world’s hottest stock market is overheating in some pockets.

Up 75% this year, the quick ascent of South Korea’s Kospi Index has largely been driven by Samsung Electronics Co. and SK Hynix Inc., which accounted for two-thirds of the advance. The surge reflects record profits at the chipmakers, and with valuations still below regional and global peers, some investors argue the rally lacks the excesses typical of past boom-and-bust cycles.