Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Seoul stocks plunge on renewed AI bubble fears
An electronic trading board at Hana Bank headquarters in central Seoul shows the benchmark KOSPI closing at 4,004.42 points, Wednesday, down 2.85 percent from the previous session. Yonhap
By Yi Whan-woo
KOSPI falls 2.85%; foreign investors drive selling spree
The benchmark KOSPI tumbled 2.85 percent to finish slightly above 4,000 points, Wednesday, as fears of an artificial intelligence (AI) bubble in the U.S. triggered a heavy sell-off across Asian stocks.
Most experts said the sharp decline, however, is likely to remain a short-term market correction rather than signaling a prolonged downturn.
After repeatedly hitting record closing highs in recent sessions, the KOSPI ended at 4,004.42 points, down 2.85 percent from Tuesday’s close. This followed an overnight decline in the U.S. where the S&P 500 fell 1.17 percent and the tech-heavy Nasdaq dropped 2.04 percent amid concerns over valuations in top AI stocks that have driven the bull market.
The Seoul index opened at 4,055.47 points and fell below 4,000 points in less than two hours. At one point, it dropped more than 6 percent to 3,867.81 points, marking the first time in eight trading days it has fallen below 3,900.
The steep fall triggered a sidecar trading curb as the KOSPI 200 futures index — a basket of the top 200 stocks — fell 5.2 percent from the previous day’s close.
The decline exceeded the 5 percent threshold, triggering a temporary halt on program sell orders for five minutes before trading resumed, although volatility persisted in the market.
This was the second time this year that a sell-side sidecar was triggered on the KOSPI, following April 7 when U.S. President Donald Trump’s announcement on reciprocal tariffs rattled global markets.
Wednesday’s volatility was also reflected in the secondary bourse Kosdaq and the foreign exchange market.
The Kosdaq fell 2.66 percent to close at 901.89 points, while the Korean currency weakened by 11.5 won, finishing at 1,449.4 won per U.S. dollar in daytime trading.
A sidecar was also activated on the Kosdaq as the index breached its threshold at one point, with the Kosdaq 150 futures down 6.23 percent and the Kosdaq 150 index falling 6.01 percent.
“Because the market has risen so sharply in such a short period, investor sentiment seems to be reacting sensitively to AI bubble fears,” said Kim Ji-young, head of research at Kyobo Securities. “We need to observe the situation throughout the week to determine whether the foreign selling indicates a sustained trend."
Kim Dong-won, head of research at KB Securities, voiced a slightly different view, pointing out that the index has risen by about 70 percent since the beginning of the year and that it is now “undergoing a healthy short-term correction.”
“Looking at the IT industry in the past, when a new cycle emerged, it typically lasted at least a decade. If the KOSPI’s pullback is due to the so-called ‘AI bubble’ concerns, it is likely to be short-lived,” he said.
As for the KOSPI, the losses were driven by foreign investors, whose net selling totaled more than 2.5 trillion won ($1.72 billion), while institutional investors sold more than 79 billion won.
Retail investors, however, posted net buying of more than 2.5 trillion won, helping to ease the pace of the decline later in the session.
The drop came after the KOSPI hit unprecedented closing highs of 4,000 points on Oct. 27, 4,100 points on Friday and 4,200 points on Monday.
The record rally had been led by major stocks such as Samsung Electronics and SK hynix — the largest market bellwethers, which together account for more than 25 percent of the KOSPI’s market capitalization.
On Wednesday, Samsung Electronics fell 4.1 percent to close at 100,600 won, remaining above the 100,000 won mark despite fluctuations. SK hynix dropped 1.19 percent to 579,000 won, falling below the 600,000 won level for the second consecutive trading day.