Korean market crash: Kospi plunges 8%, trading halted

Dubai: South Korea’s benchmark Kospi index plunged 8% on Thursday as a worldwide rout in semiconductor shares pushed investors to abandon the most crowded AI trades, Bloomberg reports.

The Seoul exchange halted trading for 20 minutes as losses mounted. SK Hynix and Samsung Electronics each sank more than 9%. In Tokyo, the Nikkei 225 fell over 5%, with chip-linked names such as Ibiden and Kioxia among the weakest. The damage spread across the region. Taiwan’s Taiex dropped over 3%, while China’s chip-heavy Star 50 index touched its lowest level since April.

What's causing the pain?

Two triggers drove the selling. US consumer prices rose in September at their fastest pace in five months coming in at 3.7%, up from 3.4% in August. This has investors worried as it will strengthened bets on more aggressive Federal Reserve tightening.

At the same time, you had CoreWeave shares in the US, tumble after its bonds dropped to levels that typically signal distress. Its notes due 2032 now trade near 78 cents on the dollar.

Hebe Chen, an analyst at Vantage Global Prime, told Bloomberg that Korea was absorbing the worst of the global AI selloff. CoreWeave’s funding strain and hotter US inflation have raised fears over borrowing costs, she explains, and investors keep cutting Samsung and SK Hynix positions.

A closely watched US gauge of chip stocks has lost $1.6 trillion in market value across six straight sessions. Strong results from Samsung and ASML Holding failed to steady nerves.

Foreigners dump $10b in October

Foreign investors lead the exit. They sold $1.8 billion of Kospi shares on Thursday morning alone and more than $10 billion so far in October. The index is heading for a seventh consecutive decline and its lowest close since early April.

SK Hynix, once Asia’s flagship AI stock, has fallen 57% from its summer peak and shed more than $660 billion in value. Its shares had climbed over 1,000% in the 12 months to June. Leveraged exchange-traded products tied to the stock fed heavy retail trading during that run.

Debt worries are growing. SoftBank Group paid record yields late last month to fund its AI plans.

Valuations now look cheap. The Kospi trades below five times forward earnings, less than half the level of a year ago. Attention now turns to Taiwan Semiconductor Manufacturing Co., which reports earnings later Thursday. Its shares slipped as much as 2.8% in morning trading. Taiwanese tech stocks have held up better than Korean peers in recent weeks.