South Korea's stock market faced intensified selling pressure for a second consecutive session, driven by disappointing results from SK hynix and a reduction in holdings by retail investors.

The benchmark Kospi index tumbled as much as 8%, on track for its worst monthly decline on record, with a drop exceeding 30% so far in July. The market's stellar rally earlier this year had been almost entirely reliant on two chip stocks: Samsung Electronics and SK hynix.

Shares of SK hynix plunged over 10% on Wednesday after the company's earnings call with analysts concluded without providing significant details on shareholder returns or long-term contracts with clients. The company also reported a 557% jump in second-quarter operating profit and announced plans to boost capital expenditure to at least $31 billion.

Josh Gilbert, Chief Analyst for Asia Pacific and the Middle East at eToro Ltd, noted that while SK hynix raised its capital spending to over 40 trillion won, its silence on shareholder returns and pricing mechanisms in long-term contracts unsettled investors. Given the heavy weighting of SK hynix and Samsung Electronics in the Kospi index, investors have few options to avoid losses when both stocks decline simultaneously.

Retail investors, who had fueled the Kospi's rally earlier this year through stock financing and leveraged ETFs, turned net sellers on Wednesday. During morning trading, they divested approximately 1.47 trillion won ($1 billion). The Kospi index fell below the 6,000-point mark, hitting its lowest level since early April. Investors are now awaiting Samsung Electronics' earnings report due on Thursday, along with earnings from other major U.S. tech companies this week.