Seoul: South Korean stocks closed over 4 percent lower on Monday as renewed concerns over artificial intelligence (AI) impacted the semiconductor sector, coupled with escalating tensions in the Middle East. The Korean won strengthened against the U.S. dollar.
According to Yonhap News Agency, the Korea Composite Stock Price Index (KOSPI) dropped significantly by 304.33 points, or 4.46 percent, ending at 6,516.27 points, after experiencing a low of 6,472.80 during the session. The trading volume was moderate with 339.5 million shares amounting to 28.4 trillion won (US$19.2 billion). A total of 796 shares declined, vastly outnumbering the 97 that advanced.
Institutional investors were net sellers, disposing of shares worth 919.1 billion won, while foreign and retail investors collectively purchased a net 864.4 billion won. "Unfavorable factors related to semiconductors and worsening conflict risks between the United States and Iran dampened investor sentiment," commented Lee Kyoung-min, an analyst at Daishin Securities.
On the previous Friday, U.S. stocks also suffered losses, primarily due to a downturn in the semiconductor sector. This was triggered by the introduction of a new AI model called Kimi K3 by Chinese startup Moonshot. This model, revealed on Friday, is perceived to rival advanced AI models from U.S. companies such as OpenAI and Anthropic, but at a reduced cost. This development has raised questions about the justification for substantial capital investments from hyperscalers, thus adding pressure on the stock market.
Further compounding the issues affecting KOSPI was the rising tension in the Middle East. The U.S. military reported the death of a third U.S. soldier in Iraq amid ongoing skirmishes between the U.S. and Iran.
Most stocks closed lower, with market leader Samsung Electronics declining by 4.31 percent to 244,000 won, and competitor SK hynix dropping 4.23 percent to 1,764,000 won. Shares related to AI infrastructure were also hit by renewed sector concerns, with LS Electric falling 5.63 percent to 179,300 won, and Hyosung Heavy Industries Corp. decreasing by 8.96 percent to 2,539,000 won.
However, there were some gains in the market; shipping company HMM edged up 0.1 percent to 20,150 won, while refiner S-Oil rose by 1.24 percent to 146,700 won.
The Korean won concluded at 1,478.4 against the U.S. dollar as of 3:30 p.m., marking an increase of 0.1 won from the preceding session. Meanwhile, bond prices fell, with the yield on three-year Treasurys climbing 4.7 basis points to 3.895 percent, and the return on five-year government bonds rising 5.5 basis points to 4.154 percent.