Seoul:South Korean stocks experienced a significant decline, dropping more than 3% due to substantial sell-offs in the tech sector amid growing concerns over extensive artificial intelligence (AI) expenditure. The Korean won, meanwhile, saw an increase in value against the U.S. dollar.
According to Yonhap News Agency, the Korea Composite Stock Price Index (KOSPI) opened 2.46% lower and continued to fall, closing at 5,648.79, which is a decrease of 210.29 points or 3.59%. The trading volume was relatively low, with 192.4 million shares valued at 14.1 trillion won (US$10.5 billion) changing hands, and the number of declining stocks outnumbering gainers 656 to 220.
Foreign investors and institutions were net sellers, selling a net 1.5 trillion won and 511.7 billion won, respectively, while individual investors purchased a net 1.7 trillion won. The decline in South Korean stocks mirrored the overnight performance on Wall Street, where tech and AI-related shares faced instability, leading to a 1.07% drop in the Nasdaq Composite and a 0.51% decrease in the S&P 500. The PHLX chip index also fell by 3.4% after experiencing a significant drop of 7.2% the previous Friday.
Investors expressed doubts about the productivity and profitability of the extensive investment in AI infrastructure, especially in light of some global tech companies' recent disappointing earnings reports. Additionally, there was caution among investors ahead of the U.S. midterm elections, where President Donald Trump's Republican Party faced challenges in maintaining its congressional majority.
Kim Seok-hwan, an analyst at Mirae Asset Securities, noted that concerns about the profitability of AI investments persisted, contributing to the sharp decline in chip shares in the U.S. market, which in turn affected the Korean market. Semiconductor shares were among the hardest hit, with Samsung Electronics dropping 4.15% to 219,500 won and SK hynix decreasing by 5.03% to 1.4 million won.
Other major declines included SK Square, the parent company of SK hynix, which fell 5.37% to 899,000 won, and Samsung Electro-Mechanics, the electronic components arm of Samsung Electronics, which lost 7.38% to 1.1 million won. Leading internet companies also saw declines, with Naver dipping 3.65% to 169,000 won and Kakao sliding 3.03% to 28,800 won.
Oil refiners were not spared from the downturn, as crude prices fell sharply due to hopes for a diplomatic resolution in the Middle East. SK Innovation, the industry leader, plunged 9.36% to 119,100 won, and S-Oil dropped 11.77% to 114,700 won.
The local currency was quoted at 1,341 won against the U.S. dollar, reflecting an increase of 2.8 won from the previous trading session's close. Bond prices, which move inversely to yields, saw an increase, with the yield on three-year Treasurys falling 0.4 basis points to 3.736, and the yield on the benchmark five-year government bonds dropping 2.2 basis points to 3.870.