South Korea's KOSPI Index Plummets Over 7% Again
The KOSPI index in South Korea plummeted over 7% again in early trading on Thursday, briefly falling below 5600 points, marking a new low since July 30. The index triggered a sell-off circuit breaker at the opening, hitting a low of around 5500 during the session.
Samsung Electronics fell about 8.4%, while SK Hynix dropped approximately 11%. Other large stocks also faced pressure, including SK Square down 10.8% and Samsung Electro-Mechanics down 15.36%. The KOSPI has seen consecutive declines for several days, with a cumulative drop of over 40% since its peak in June, resulting in a massive evaporation of market value.
The decline followed a sell-off in U.S. tech stocks. The U.S. Consumer Price Index rose 3.7% year-on-year in September, higher than expected, leading to a 1.9% drop in the Nasdaq index, with Nvidia, Broadcom, and AMD all declining. Concerns over the deteriorating credit situation of AI-related company CoreWeave intensified, causing a significant drop in its corporate bond prices.
The Japanese Nikkei index also fell 3.9%, with SoftBank Group down 9.1% and Tokyo Electron down 6.3%. The KOSPI had already experienced multiple declines the previous week due to concerns over the technological progress of Chinese memory manufacturer CXMT and the sustainability of AI capital expenditures, with foreign investors continuing to net sell.
Foreign investors had net sold trillions of Korean won in the past few days, with some support from individual and institutional investors. The memory chip sector accounts for over half of the KOSPI's weight, and the significant fluctuations in Samsung and SK Hynix directly influence the index's direction.
The tech stock sell-off was driven by U.S. inflation exceeding expectations and concerns over AI capital expenditures, with funds flowing from heavily weighted Korean memory chip stocks to safe-haven assets. Foreign investors continued to reduce their holdings, while domestic investors partially took over. Chip manufacturers and AI-related supply chains are under pressure, while cash and non-tech assets benefit relatively.
Source: Public Information
ABAB AI Insight
The KOSPI in South Korea surpassed 9000 points in June 2026, primarily driven by AI-related demand for memory chips, leading to significant increases in Samsung Electronics and SK Hynix. Subsequently, the market began to retract due to technological advancements by Chinese CXMT in memory, large-scale reductions by foreign investors, and fluctuations in U.S. tech stocks, resulting in a cumulative decline of over 40% from the peak.
Foreign investors have continued to net sell in September and October, accumulating trillions of Korean won, while individual investors have partially taken over. Funds have shifted from heavily weighted Korean chip stocks to other markets or cash. Samsung and SK Hynix together account for over half of the index's weight, and their stock price fluctuations directly amplify the index's decline.
Similar concentration risks were observed during the downturn of the Korean semiconductor cycle in 2022 and the Nasdaq's reliance on a few tech stocks. The current Korean market is in a phase of releasing valuation and competitive pressure following the expansion of AI capital expenditures, with memory chips shifting from high profits driven by shortages to increased competition.
This essentially represents a transfer of pricing power. Technological advancements by Chinese memory manufacturers compress the pricing space for Korean chip manufacturers, while U.S. inflation data and concerns over AI capital expenditures alter global risk preferences for tech stocks. The mechanism is that an index with highly concentrated weights rapidly transmits individual stock sell-offs to the overall market, and the outflow of foreign funds further amplifies volatility, shifting pricing power from local Korean suppliers to global competitors and macro liquidity.
ABAB News · Cognitive Law
Concentration of weights amplifies individual stock sell-offs leading to index crashes
Expectations for AI capital expenditures shift from boosting to suppressing
When foreign funds exit, local weighted stocks are the first to feel the pressure