Seoul: South Korean stocks experienced a significant downturn on Friday, driven by growing concerns over a potential artificial intelligence (AI) bubble. This apprehension severely impacted major technology stocks, while the local currency, the won, fell to a seven-month low against the U.S. dollar due to substantial foreign stock selling.
According to Yonhap News Agency, the Korea Composite Stock Price Index (KOSPI) dropped sharply by 151.59 points, or 3.79 percent, closing at 3,853.26. The trading session saw a moderate volume with 307.95 million shares exchanged, valued at 14.02 trillion won (approximately US$9.5 billion). The market witnessed a broad decline, with 718 stocks falling and only 177 advancing.
Foreign investors were net sellers, unloading shares worth 2.83 trillion won. In contrast, retail investors purchased a net 2.29 trillion won and institutional investors bought 495.46 billion won worth of shares. The Korea Exchange reported that this level of net selling by offshore investors was the largest since February 26, 2021.
The negative sentiment was exacerbated by Wall Street's overnight losses and investor wariness regarding the valuation and investment strategies of AI-related stocks. Additionally, the Federal Reserve's monetary policy, particularly diminishing expectations for further rate cuts, weighed on the market.
Han Ji-young, a researcher at Kiwoom Securities, remarked that the market surrendered its gains from the previous day's Nvidia earnings surprise. Despite recent sharp gains, volatility persisted, with potential for sentiment to shift depending on upcoming economic data and AI developments.
Key tech shares suffered significant losses, with Samsung Electronics falling 5.77 percent to 94,800 won, and SK hynix dropping 8.76 percent to 521,000 won. LG Energy Solution and LG Chem also faced declines, losing 3.51 percent and 5.53 percent, respectively.
Other sectors were not spared, as Doosan Enerbility, Hanwha Aerospace, HD Hyundai Heavy, and Hanwha Ocean all recorded notable losses. POSCO, the leading steelmaker, fell 3.42 percent to 310,500 won.
In the automotive sector, Hyundai Motor saw a slight decline of 0.95 percent, whereas Kia managed a modest rise of 0.53 percent. KB Financial and Naver experienced mixed outcomes, with declines and gains, respectively.
The won was quoted at 1,475.6 against the dollar, marking its weakest point since April 9, when it stood at 1,484.1. This level was the lowest since March 12, 2009, amid the global financial crisis.
Bond prices rose, with the yield on three-year Treasurys decreasing by 3.6 basis points to 2.872 percent, and the return on five-year government bonds declining by 3.9 basis points to 3.076 percent.