South Korea's benchmark KOSPI index suffered a dramatic sell-off on Friday, plunging more than 8% within minutes of the opening bell and forcing an automatic trading halt. The crash extended a global rout in technology stocks, driven by mounting concerns over the sustainability of artificial intelligence (AI) infrastructure spending.
The KOSPI opened 2.24% lower at 5,263.26 before losses accelerated sharply. By 9:03 am local time, the index had fallen to 4,924.61, an 8.52% drop from the previous close. This triggered the Korea Exchange's first-level circuit breaker, which suspends trading in KOSPI shares and related derivatives for 20 minutes when the index declines by at least 8% for one minute. The mechanism is designed to cool panic selling, not to close the market permanently.
After trading resumed, the index remained deeply in the red, down 7.84% at 4,961.62 by 9:50 am. It later recovered above the 5,000 mark, reaching 5,144.31 by 11:28 am, though it was still down 4.45% on the day. The rebound offered little comfort to investors, as the earlier plunge underscored extreme volatility.
The smaller KOSDAQ market also activated a sell-side sidecar, temporarily restricting program sell orders for five minutes. Unlike the main-market circuit breaker, this measure did not halt all trading.
Samsung and SK Hynix Lead the Decline
The sell-off was led by Samsung Electronics and SK Hynix, which together account for nearly half of the KOSPI's market value. During the initial rout, Samsung shares fell roughly 10% and SK Hynix dropped about 13%, magnifying the benchmark's decline. By late morning, Samsung's loss had moderated to 3.67% and SK Hynix's to 6.17%.
The plunge followed a brutal session on Wall Street, where the Nasdaq Composite lost 5.52% and the Philadelphia Semiconductor Index tumbled about 12.25%. Investors are questioning the profitability of massive AI infrastructure projects, and Democratic gains in the November 3 midterm elections added uncertainty over future oversight of American data-centre construction. While no sweeping restrictions have been enacted, concerns about financing and elevated valuations predate the vote.
Both Samsung and SK Hynix supply advanced memory chips used alongside AI processors. Any slowdown in US data-centre investment could eventually affect their order outlook, even if demand remains strong today.
Foreign Selling Remains the Biggest Test
Foreign investors were the primary sellers, dumping a net 302 billion won of KOSPI shares by 9:50 am, against institutional buying of 235.4 billion won and retail purchases of 25.7 billion won. By 11:28 am, foreign selling had reached 972.1 billion won, following Thursday's outflow of about 3.44 trillion won. Such withdrawals matter because international funds hold substantial stakes in Korea's chipmakers and can move the index sharply when they reduce exposure.
Local bargain hunting can cushion falls but is unlikely to reverse persistent overseas withdrawals. Analysts are divided on whether the sell-off is overdone. Daishin Securities analyst Lee Kyung-min argued in a Friday note that the AI sell-off was excessive, suggesting tighter American oversight might delay some data centres but is unlikely to stop construction entirely. Kiwoom Securities analyst Han Ji-young warned that volatility was likely to persist despite the pause.
The KOSPI 200 volatility index climbed to 64.74, a three-month high, underscoring investor unease. Authorities pledged to monitor volatility and consider stabilising measures, without promising a market recovery.
This article is for informational purposes only and does not constitute financial advice.
