South Korean stocks plunged on Thursday as a sharp selloff in semiconductor shares dragged the benchmark Kospi lower.
The Kospi fell over 5% during the session, slipping briefly below 5,350 after opening at 5,580.
The selling triggered a temporary suspension of program trading on the main exchange, while the tech-heavy Kosdaq also activated a sell-side sidecar around noon as the index dropped below the 700 mark.
Foreign investors were the biggest sellers, offloading nearly 2 trillion won ($1.4 billion) worth of shares on the main board alone.
The selling was concentrated in semiconductor manufacturers, chip equipment suppliers and power infrastructure companies.
Investors are worried that Democratic victories in the US midterm elections could bring tighter restrictions on artificial intelligence infrastructure and data-center development.
Samsung, SK Hynix lead semiconductor selloff
Major chipmakers bore the brunt of the decline as investors reassessed the outlook for AI infrastructure spending following Democratic gains in the US elections.
Samsung Electronics fell around 8%, while SK Hynix dropped more than 10%, leading the selloff.
Semiconductor equipment and components manufacturers also came under pressure, with Hanmi Semiconductor and Samsung Electro-Mechanics recording significant declines.
The weakness followed a drop of more than 3% in the Philadelphia Semiconductor Index overnight, even as the broader US stock market closed higher.
Investors are concerned that Democratic control of Congress, alongside victories in key data-center states such as Texas and Georgia, could result in stricter oversight of AI infrastructure projects.
Proposals for greater scrutiny of electricity and water consumption, environmental impact and permitting requirements could delay new data-center construction.
South Korea is particularly exposed to such concerns because memory chips and semiconductor equipment account for a substantial share of its exports and stock market capitalization.
Qualcomm, Arm results add pressure
Mixed earnings developments from US semiconductor companies added to the negative sentiment.
Qualcomm shares fell after the company reported that handset chip revenue declined 26% to $5.14 billion, missing Wall Street expectations.
Rising memory prices have increased smartphone manufacturing costs, prompting concerns about device demand and weighing on Qualcomm’s core business.
Arm Holdings also struggled despite reporting record quarterly revenue of $1.44 billion, up 27% year over year.
Its results offered little relief to investors amid broader weakness in semiconductor stocks and concerns about the sustainability of AI-related valuations.
Defense stocks struggle
Defense companies also faced heavy selling as investors anticipated that Democratic lawmakers could seek to restrain military spending and increase pressure on the administration to reduce its involvement in the Iran conflict.
LIG Defense & Aerospace fell 16%, Hanwha Systems declined 11.45%, and Hanwha Aerospace lost over 8%.
However, the selling was not uniform across the South Korean market.
“Still, more than 400 stocks are advancing even after the sell-side sidecar was triggered, which shows sector rotation is taking place,” Kang Jin-hyuk, an analyst at Shinhan Securities, told the Seoul Economic Daily.
The Korean won also weakened slightly against the US dollar.
Elsewhere in Asia, Japan’s Nikkei 225 slipped around 1.86%, while China’s Shanghai Composite edged lower. Hong Kong’s Hang Seng Index bucked the regional trend, gaining nearly 3%.
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