Asian markets today: South Korea's Kospi crashes 8%, plunges below 5,000 | What's behind the sell-off?
Asian markets today: South Korea's benchmark KOSPI index plunged 8.5% in early trading on Friday, November 6, tracking a sharp sell-off in artificial intelligence (AI) and semiconductor stocks on Wall Street overnight. Trading on the Korea Exchange was suspended for 20 minutes after the index triggered its first 8% circuit breaker shortly after the market opened.
The steep decline dragged the KOSPI below the 5,000 mark, falling short of the target set by President Lee Jae Myung during his presidential campaign in 2025. The benchmark dropped as much as 8.8% before paring some losses.
The sell-off followed a global market rout on Thursday, which saw the Nasdaq 100 tumble 6.4%, wiping out a record $2.3 trillion in market capitalisation. South Korean equities bore the brunt of the global AI-related sell-off, given the country's heavy dependence on its two semiconductor giants.
The KOSPI had earlier surged past 9,000 in the summer, fuelled by the AI boom and strong gains in chipmakers, making South Korea one of the world's best-performing equity markets. However, concerns over a potential slowdown in AI infrastructure spending, alongside fears that the Democratic Party's sweep of the US Congress could constrain the AI expansion, have triggered a sharp reversal in sentiment.
Meanwhile, South Korean semiconductor stocks witnessed heavy selling pressure. Samsung Electronics and SK Hynix plunged more than 11% each in early Friday trade before recovering some of their losses.
Chip-heavy stock indices across Asia declined sharply on Friday, with Japan’s Nikkei 225 and Taiwan’s Taiex heading towards technical bear market territory after falling 20% from their respective peak levels.
Investors stepped back from AI-related stocks this week following the US midterm elections, amid concerns that tighter regulations on artificial intelligence could restrict growth opportunities for semiconductor manufacturers and data centre suppliers. A closely tracked index of US semiconductor stocks plunged 12% on Thursday, marking its steepest single-day decline since the onset of the Covid-19 pandemic in March 2020.
“Global markets have come under significant selling pressure following a sharp overnight sell-off on Wall Street, triggered by a broad-based unwinding of AI-related trades and heavy losses in semiconductor stocks. The Dow Jones Industrial Average fell 3.45%, while the S&P 500 and Nasdaq Composite declined 4.36% and 5.52%, respectively, pushing the latter two benchmarks into correction territory. The weakness extended across Asian markets, with Japan’s Nikkei 225 falling more than 5% and South Korea’s KOSPI losing over 6%, underscoring the extent of the risk-off sentiment across global equities,” said Ponmudi R, CEO of Enrich Money.
South Korea’s Kospi had nearly tripled in value over the 12 months leading up to its June peak, driven by optimism over rising memory chip prices and expectations of stronger earnings from Samsung Electronics and SK Hynix. The rally in these stocks attracted significant retail investor participation and fuelled the growth of leveraged exchange-traded funds linked to the two chipmakers. The surge briefly helped South Korea become the world's sixth-largest equity market by market capitalisation.
However, a sell-off began during the summer as concerns grew over the funding of AI infrastructure and the sustainability of spending by major technology companies on semiconductor products. These concerns weakened expectations of continued investment by Big Tech companies, dragging the Kospi nearly 46% below its June record high.
Meanwhile, South Korea's Finance Ministry said on Friday that authorities would closely monitor global financial market developments and ensure that relevant agencies take timely and preventive measures to avoid excessive volatility in the domestic stock market beyond what economic fundamentals justify.
(With inputs from Bloomberg)
Vaamanaa covers business and stock market news. Started in 2020, she has been producing news on digital platforms for over 4.5 years now. She writes on markets, commodities, IPOs, and industry. She has worked for news channels like Jagran New Media and Business Insider India. You can reach out to her at vaamanaa.sethi@htdigital.in.
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