South Korean equities reversed sharply on Tuesday, with the benchmark KOSPI sliding 2.48% to 5,714.06 by mid-morning in Seoul, after touching an intraday low of 5,662.37. The decline wiped out the previous session's 2.24% rally, when the index closed at 5,859.08 on heavy institutional buying.
The latest sell-off was led by technology heavyweights, with Samsung Electronics and SK Hynix falling 4.59% and 5.10%, respectively. The weakness extended beyond chips, as POSCO Holdings dropped 5.3% and SK Innovation plunged 7.76%. The junior KOSDAQ index also lost ground.
Institutional support evaporates
The key difference between Monday's rebound and Tuesday's retreat was the behavior of domestic institutional investors. On Monday, institutions bought a net 1.23 trillion won, helping the KOSPI gain 128.34 points and briefly touch 5,910.83. However, that buying was offset by foreign and retail selling of a combined 1.72 trillion won, leaving the rally reliant on institutional support.
By around 9:30 am Tuesday, foreign investors had sold a net 388.1 billion won, while domestic institutions unloaded another 308.2 billion won. Retail investors stepped in to purchase approximately 670.4 billion won, but their buying was insufficient to counter the broader selling pressure.
Lee Kyoung-min of Daishin Securities had expressed optimism on Monday, citing attractive valuations and improving corporate earnings as potential supports for a recovery. However, the swift reversal suggests investors remain hesitant to commit to a sustained uptrend without stronger buying conviction.
AI spending worries spread from Wall Street
The selling followed another difficult session for US technology stocks, with the Nasdaq Composite falling 1.07% and the S&P 500 losing 0.51% on Monday. Concerns that expensive AI infrastructure projects may not generate adequate returns weighed on sentiment, exacerbated by Oracle's plan to raise $20 billion through debt and equity. Oracle's shares dropped 8.8%, while Micron Technology declined 5.8%.
The pressure quickly transmitted to Seoul, hitting semiconductor names beyond Samsung and SK Hynix. Hanmi Semiconductor lost 4.17%, and SK Square fell 4%. Han Ji-young of Kiwoom Securities noted that weakness in American AI stocks was outweighing potentially supportive factors such as lower oil prices and interest rates.
US election results loom
Attention is now shifting to Tuesday's US midterm elections, with results expected to emerge during Wednesday's Asian trading session. The outcome could influence Treasury yields, the dollar, and global risk appetite. Kim Jae-seung of Hyundai Motor Securities warned that retail investors have less buying capacity following the market's earlier rally and subsequent correction, though he also highlighted potential counterarguments supporting the market's resilience.
Despite the pullback, retail investors have continued to buy the dip, helping the KOSPI recover from its steepest early losses. However, the index's struggle to hold above 5,700 underscores the uncertainty surrounding its near-term direction.
This article is for informational purposes only and does not constitute financial advice.
