Kospi drops with Samsung, SK hynix hit hard by AI skepticism

Seoul shares fell sharply as tech giants dropped amid fears of U.S. economic slowdown, with the Kospi index closing below 2,600 for the first time since early August.

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 2,580.80 points on Wednesday, down 83.83 points, or 3.15 percent, from the previous trading session. [NEWS1]

Seoul shares took a steep drop on Wednesday with tech giants Samsung Electronics and SK hynix losing ground, mirroring overnight losses in U.S. Big Tech stocks amid heightened market synchronization in the chip sector.

The Kospi fell 83.83 points, or 3.15 percent, from the previous session to close at 2,580.80. The benchmark index dipped below the 2,600 threshold for the first time since early August, when concerns over a slowdown in the U.S. economy drove a significant market correction across Asian stock exchanges.

Trading volume stood at 455 million shares worth 11.4 trillion won ($8.5 billion), with losers far outnumbering gainers 862 to 52. Foreigners net sold 988.6 billion won on the Kospi bourse while institutional investors shed 730 billion won. Retail investors purchased 1.65 trillion won.

A selling spree in tech shares, led by foreigners, drove the sharp fall. The KRX Semiconductor Index, composed of chip stocks trading on the Korea Exchange, fell 5.94 percent from the previous trading day.

Samsung Electronics dipped right after the market opening on Wednesday and closed at 70,000 won, down 3.45 percent. Foreigners net sold Samsung Electronics shares worth 516.5 billion won, and institutions shed 283.8 billion won, while retail investors purchased a net of 774.8 billion won.

SK hynix, a memory supplier for Nvidia, plunged 8.02 percent to close at 154,800 won with foreigners selling 341.9 billion won, institutions 33 billion won, and retail investors picking up 354 billion won.

Hanmi Semiconductor, a Kospi-listed chip manufacturing equipment supplier, fell 7 percent to 7,600 won, and DB HiTek declined 5.58 percent to 38,050 won.

The latest drop in the domestic market reflected a decline in U.S. chip shares as weaker-than-expected manufacturing data reignited fears of an economic contraction. Nvidia shed 9.53 percent and Intel fell 8.8 percent on the tech-heavy Nasdaq on Tuesday, while Micron Technology lost 7.96 percent.

Growing skepticism of growth momentum in the AI segment, as well as a Bloomberg report of U.S. Justice Department launching an antitrust probe of Nvidia, further drove investors away from domestic tech shares.

The Korean stock market experienced a similar pattern back on Aug. 5 when the benchmark index saw an 8.77 percent plunge driven by weak U.S. market data, yen-dollar appreciation and a consequent selling spree from foreign investors.

The Bank of Korea attributed the unprecedented drop to enhanced market synchronization in the tech sector between Korea and the United States.

“The scope of the decline was bigger in Korea, as well as in Japan and Taiwan where the tech industries represent a significant portion of their economies, compared to the United States and the European nations,” said a central bank report issued on Aug. 31. The report was submitted to the Monetary Policy Board on Aug. 22 when a rate-setting meeting took place.

The BOK suggested that “the significant correction in the Korean stock index was mainly driven by the strengthened industrial link with the U.S. chip sector as the impact that negative issues involving U.S. tech companies have on the domestic market has increased.”

Korea's joining the “Chip 4 Alliance” and global supply chain restructuring in the AI chip sector heightened the country’s reliance on the U.S. chip market, the central bank report said.

Meanwhile, the local currency was trading at 1,342.20 won against the dollar, up 0.8 won from the previous session. The Kosdaq lost 28.62 points, or 3.76 percent, to close at 731.75.

Bond prices, which move inversely to yields, closed higher. The yield on three-year government bonds lost 5.0 basis points to reach 2.931 percent, and the return on the benchmark U.S. 10-year government bond declined by 7.5 basis points to 3.832 percent.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]