Seoul:South Korea's Korea Composite Stock Price Index (KOSPI) fell below the 5,000-point mark on Friday, influenced by concerns that the Democratic Party's victory in the U.S. midterm elections could decelerate the development of data centers for artificial intelligence (AI).

According to Yonhap News Agency, the KOSPI witnessed a decline of over 8 percent, triggering a 20-minute trading halt on the market, a measure applied for the first time in 16 trading sessions. This downturn was a result of a tech sell-off on Wall Street, significantly impacting major shares such as Samsung Electronics and SK hynix, which saw a decrease of more than 10 percent in morning trading.

The Democratic Party's success in securing majorities in both the U.S. Senate and House of Representatives has led to predictions that U.S. President Donald Trump's influence will diminish during the remaining years of his term. Observers are particularly attentive to whether a Democrat-controlled Congress will impact the construction pace of AI data centers, especially as the Democratic Party also gained gubernatorial leadership in Texas, a pivotal state for AI infrastructure.

The NASDAQ also experienced a more than 5 percent drop overnight, contributing to the unease in global markets. Analysts, including Han Ji-young from Kiwoom Securities, anticipate persistent volatility in the local stock market following the sharp declines.

The KOSPI 200 volatility index (VKOSPI) reached a three-month high of 64.74, reflecting heightened fears in South Korea's stock market. Daishin Securities noted that the market's reaction to the AI-related concerns was disproportionate, with analyst Lee Kyung-min suggesting that while the Democratic win might delay AI data center projects, a complete halt is unlikely.

Finance Minister Lee Hyoung-il has pledged to implement measures to manage the volatility impacting the local stock market. He assured that the government will proactively establish and execute strategies to mitigate excessive reactions to the U.S. tech sell-off, while also monitoring external uncertainties. Despite these challenges, Lee emphasized that South Korea's economic fundamentals remain strong, with some experts forecasting continued global investment in AI.