Seoul: South Korean stocks experienced a significant downturn on Monday, with the KOSPI index crashing over 8 percent. This marks the third consecutive session of losses as investors offloaded major stocks due to concerns over the profitability of artificial intelligence (AI) and potential hawkish moves by the U.S. Federal Reserve.
According to Yonhap News Agency, the local currency saw a rise against the U.S. dollar, rebounding from a 17-year low following verbal intervention by financial authorities. The Korea Composite Stock Price Index (KOSPI) sank 676.18 points, or 8.29 percent, closing at 7,484.41. The KOSDAQ index also dropped, falling more than 9 percent to close at 911.39.
The KOSPI witnessed a heavy trade volume of 448.3 million shares, valued at 47.8 trillion won (approximately US$31.2 billion). The number of losing stocks far exceeded the winners, with 873 stocks falling compared to just 42 gaining. Foreign and institutional investors sold off local shares worth 355.5 billion won and 1.6 trillion won, respectively, while retail investors purchased 1.76 trillion won.
The plunge in the stock market was largely expected following significant losses on Wall Street last week. The declines were driven by a major drop in semiconductor shares and fears of a potential rate hike by the U.S. Federal Reserve, spurred by a stronger-than-anticipated U.S. jobs report for May. The Dow Jones Industrial Average dipped 1.35 percent, while the S and P 500 decreased by 2.64 percent, and the tech-heavy Nasdaq composite fell by 4.18 percent.
In response to the market turbulence, the Korea Exchange (KRX) activated a circuit breaker for the KOSPI shortly after opening, halting trading for 20 minutes, and executed a consecutive sell-side sidecar around 9:34 a.m. Similar measures were taken for the KOSDAQ market as well.
A report from Samsung Securities indicated that the market's pullback was not due to weakening fundamentals but to profit-taking sentiment, especially in the semiconductor sector, which had seen an extended rally. The KOSPI had been performing well in recent months, nearing the 9,000-point mark, largely fueled by major semiconductor stocks like Samsung Electronics and SK hynix.
Market analysts are forecasting a challenging week ahead for the KOSPI, with key financial events such as U.S. inflation data, treasury yields, and discussions on the sustainability of AI investments. Furthermore, geopolitical tensions, like the recent exchange of strikes between Iran and Israel, have dampened investor sentiment.
Among the major stocks affected, Samsung Electronics dropped 10.18 percent to 295,500 won, and SK hynix fell 7.68 percent to 1.91 million won. However, some companies saw gains, such as Naver, which rose 9.2 percent on news of a joint AI project with Nvidia, and SK Networks, which surged 30 percent due to a broader partnership announcement with SK Group and Nvidia.
In the currency market, the Korean won was trading at 1,535.0 against the U.S. dollar, an increase from the previous session, after financial authorities committed to taking strong measures against excessive volatility in the foreign exchange market.