Key facts
- South Korean stocks plunged nearly 8 percent on Thursday.
- The KOSPI index closed down 7.89% at 7,648.09.
- A sell-side sidecar was activated for the KOSPI due to a sharp drop.
- Concerns over excess AI chip capacity and increased competition impacted semiconductor stocks.
- The Korean won weakened against the U.S. dollar.
Seoul shares plunged nearly 8 percent on Thursday, dragged down by a sharp sell-off in semiconductor shares as investor sentiment soured amid renewed concerns over excess capacity. The benchmark Korea Composite Stock Price Index (KOSPI) fell 655.32 points, or 7.89 percent, to close at 7,648.09, after hitting an intraday low of 7,616.33.
Due to the steep decline, the bourse operator Korea Exchange (KRX) activated a sell-side sidecar for the KOSPI around 9:07 a.m., halting program trading for five minutes. A sell-side sidecar is triggered when the KOSPI 200 Futures index decreases 5 percent or more for at least one minute.
Investor sentiment toward semiconductor stocks weakened following media reports that U.S. tech giant Meta Platforms is considering selling access to its artificial intelligence (AI) computing infrastructure, fueling concerns that the company may have built more AI computing capacity than it currently needs. Samsung Electronics and SK hynix, the top two chipmakers, also faced selling pressure after reports that Apple Inc. is in talks to source chips from two Chinese semiconductor companies, raising concerns about intensifying competition for Korean chipmakers.
U.S. stocks retreated overnight, with the S&P 500 slipping 0.2 percent and the tech-heavy Nasdaq 100 falling 1.5 percent. The Philadelphia Semiconductor Index, a key gauge of chip stocks, tumbled 6.3 percent. Federal Reserve Chair Kevin Warsh noted that inflation expectations and risks have eased in recent weeks, bolstering hopes for a delay in an interest rate hike.