Seoul stocks dip over 5% on chip sell-off after record surge

Seoul’s stock market opened higher on Thursday as investors sought bargains in the wake of sharp declines, despite ongoing concerns about artificial intelligence spending and uncertainty surrounding the Federal Reserve’s monetary policy. The benchmark Korea Composite Stock Price Index (KOSPI) rose 0.35 percent, or 19.85 points, to 5,683.09 by 9:15 a.m., reversing earlier losses. This followed a steep drop of 5.98 percent on Wednesday, bringing the index to 5,663.24, and a further 10.84 percent plunge the prior session. The recent volatility in the KOSPI has been influenced by both domestic and international factors. On Wednesday, the U.S. Federal Reserve held its benchmark interest rate steady at 3.5-3.75 percent, marking its fifth consecutive meeting without a rate adjustment. The central bank did not provide clear guidance on future policy moves, adding to investor uncertainty. Meanwhile, Wall Street saw the Dow Jones Industrial Average fall 2.19 percent and the Nasdaq Composite decline 1.74 percent overnight. Despite these challenges, some large-cap stocks in South Korea showed resilience. Samsung Electronics, a key indicator of the market, rose 0.96 percent, while Hyundai Motor climbed 0.57 percent and Hanwha Aerospace surged 6.79 percent. Samsung Electronics reported a significant increase in net profit, reaching 71.62 trillion won ($49.6 billion) in the April-June quarter, driven by strong demand for semiconductors linked to the AI boom. Its sales more than doubled to 171.49 trillion won from 74.56 trillion won during the same period last year. However, not all sectors performed well. SK hynix, a major competitor in the semiconductor industry, fell 4.78 percent, and LG Electronics, the leading home appliance manufacturer, dropped 0.53 percent. The Korean won appreciated slightly against the U.S. dollar, trading at 1,436.85 won per dollar by 9:15 a.m. The market had previously experienced a dramatic downturn on Monday, with the KOSPI falling over 5 percent. This decline followed a record 18 percent surge on Friday, prompting investors to lock in profits. The index closed at 6,257.45, down 338 points, or 5.12 percent. Trade volume remained relatively low, with 270.9 million shares traded worth 26.1 trillion won ($18.2 billion). Retail investors were active buyers, purchasing a net 4.65 trillion won worth of stocks, while foreigners and institutions sold a combined net 4.77 trillion won. Analysts noted that foreign investors were particularly focused on taking profits in semiconductor stocks. Samsung Electronics and SK hynix had risen nearly to their daily limits on Friday due to speculation that leveraged exchange-traded funds might be winding down. The market also faced pressure from falling oil prices, which were influenced by eased tensions between the United States and Iran. However, this relief was offset by broader concerns about the sustainability of AI-driven investments and the potential impact on corporate valuations. On Tuesday, the KOSPI opened higher, tracking gains on Wall Street. The index rose 0.77 percent, or 48 points, to 6,305.45 by 9:15 a.m. This came after the Dow Jones Industrial Average increased 1.32 percent and the Nasdaq Composite climbed 2.13 percent overnight. Amazon’s strong earnings report, including a 4.5 percent rise in share price, contributed to the positive sentiment on Wall Street. Domestically, HD Korea Shipbuilding & Offshore Engineering rose 2.17 percent, and LIG Defense & Aerospace gained 4.86 percent. Chipmaker SK hynix rose 0.7 percent, while shipping firm HMM jumped 4.43 percent and steelmaker POSCO Holdings gained 0.82 percent. However, Samsung Electronics fell 0.2 percent, Hyundai Motor declined 1.91 percent, and cosmetics firm Amorepacific dropped 0.54 percent. By Thursday, the KOSPI continued its fluctuation, falling 1.23 percent, or 69.68 points, to close at 5,593.56. The index had reached an intraday low of 5,547.41 but briefly touched 5,976.82. Tech stocks were among the hardest hit, with Samsung Electronics down 0.72 percent and SK hynix plunging 5.64 percent. Hyundai Motor, Korean Air, Naver, and Doosan Enerbility all recorded declines. Despite the overall downward trend, some sectors found support. HD Korea Shipbuilding & Offshore Engineering rose 10 percent, and Hanwha Aerospace jumped 6.79 percent. The latter’s performance was bolstered by a memorandum of understanding signed with Fraser Industries LLC to aid the revitalization of the U.S. shipbuilding industry under Seoul’s “Make American Shipbuilding Great Again” initiative. The Korean won strengthened slightly against the U.S. dollar, trading at 1,437.4 won per dollar by 3:30 p.m. on Thursday, compared to 1,446.7 won a day earlier. As the market continues to navigate through uncertainties related to AI spending and Federal Reserve policies, investors remain cautious, balancing opportunities for profit-taking with the risks posed by global economic conditions.