Seoul:South Korean stocks experienced a dramatic decline of more than 7 percent on Thursday, driven by significant losses in major chipmakers. This drop comes amid escalating concerns about the sustainability of investments in artificial intelligence (AI) and potential interest rate hikes by the U.S. Federal Reserve. Concurrently, the Korean won depreciated against the U.S. dollar.
According to Yonhap News Agency, the Korea Composite Stock Price Index (KOSPI) opened 5.59 percent lower and continued to fall, ultimately tumbling 454.59 points, or 7.57 percent, to close at 5,554.22. This marks its lowest level since April 7, when the index fell below 5,500. The KOSPI's decline extended to a seventh consecutive session, its longest losing streak since September 2024.
The sharp downturn led the Korea Exchange (KRX) to initiate a sell-side sidecar shortly after trading began, pausing program selling for five minutes as KOSPI 200 futures dropped more than 5 percent for at least one minute. As the losses intensified, a circuit breaker was activated at 1238 p.m., halting trading on the main bourse for 20 minutes after the KOSPI fell over 8 percent from the previous session's close.
The market pressure was compounded by overnight declines in U.S. stocks, fueled by renewed skepticism toward AI-related spending and unexpectedly high inflation data for September. The U.S. Consumer Price Index (CPI) increased by 0.6 percent month-on-month in September, marking the fastest monthly rise since April, heightening fears that persistent inflation could lead the Federal Reserve to increase interest rates.
Trading volume was moderate, with 363.47 million shares valued at 26.87 trillion won (US$19.97 billion). Decliners significantly outnumbered advancers by 787 to 112. Foreign investors sold a net 3.62 trillion won, while institutions and individuals purchased a net 1.69 trillion won and 1.29 trillion won, respectively.
Daishin Securities analyst Lee Kyoung-min stated, "The KOSPI market came under heavy selling pressure amid concerns over the sustainability of AI-related investments, intensifying competition in memory chip production, and rising borrowing costs." He added that semiconductor shares fell sharply, and IT hardware and power equipment stocks also saw declines as investor sentiment toward the broader AI value chain weakened.
Leading technology stocks suffered considerable losses, with Samsung Electronics dropping 9.48 percent to 210,000 won and SK hynix falling 11.06 percent to 1.26 million won. SK Square, SK hynix's parent company, decreased 10.21 percent to 765,000 won, while Samsung Electro-Mechanics, affiliated with Samsung Electronics, plunged 15.36 percent to 1.16 million won.
The Korean won was quoted at 1,344.6 won against the U.S. dollar by 330 p.m., down 2.3 won from the previous session's close. In the bond market, prices rose as yields moved inversely, with the yield on three-year Treasurys decreasing by 1.6 basis points to 3.867, and the benchmark five-year government bond yield dropping 4 basis points to 4.007.