South Korean equities opened sharply lower on Monday, led by a steep decline in chipmaker stocks as funds rapidly rotated out of shares that had benefited from the artificial intelligence theme.
The benchmark Kospi index was down more than 6% at the time of writing, a drop that brings its cumulative decline from recent highs to approximately 13%, signaling a potential entry into a technical correction.
Shares of memory chip giant Samsung Electronics Co Ltd fell over 8%, while peer SK Hynix Inc dropped more than 5%. The sudden market plunge triggered a circuit breaker mechanism, leading to a temporary trading halt.
The Korea Exchange convened an emergency meeting on Monday to assess heightened market volatility and discuss measures to ensure orderly market operations.
Over recent sessions, concerns over an overheated AI rally, combined with macroeconomic uncertainties, have dampened the upward momentum for global technology stocks.
Following a period of leading global gains, the South Korean market is experiencing an unusually sharp downturn, although the Kospi index remains up 77% year-to-date.
Concurrently, foreign capital is accelerating its withdrawal from the South Korean market, with net selling of Kospi constituent stocks exceeding $10 billion last week alone.
This has placed significant pressure on the Korean won, which has weakened to its lowest level against the US dollar since March 2009.
An analyst at Hana Securities noted that the Korean market is facing a 'Black Monday' risk influenced by "simultaneous occurrences of exchange rate instability, interest rate repricing, and profit-taking in the semiconductor sector."
The South Korean government announced a series of targeted measures on Sunday to support the won, pledging strong action against speculative trading and related activities.
This move comes as policymakers across Asia intensify efforts to bolster their currencies against a backdrop of rising energy costs due to conflict in the Middle East and a strengthening US dollar.
Comments