Kospi tumbles over 5% as foreigners dump W3.39tr in shares amid AI investment fears

The Kospi tumbled more than 5% on Thursday, falling below the 5,400 mark as concerns over delays in AI data center construction following the US midterm elections hammered the country's two leading semiconductor stocks and dragged the broader index lower. Sell-side circuit breakers, known as sidecars, were triggered on both the Kospi and Kosdaq markets.

According to Korea Exchange, the Kospi closed down 300.00 points, or 5.28%, at 5,383.80. The index opened 103.71 points, or 1.82%, lower at 5,580.09 before extending its losses throughout the session.

As the selloff deepened, a sell-side sidecar was triggered on the main board at 10:16 a.m. after KOSPI 200 futures prices fell 5.25%.

Foreign investors were the primary force behind the decline, posting net selling of 3.39 trillion won ($2.53 billion) on the main board. Retail and institutional investors absorbed much of the selling pressure, recording net purchases of 2.28 trillion won and 841.7 billion won, respectively.

"With AI uncertainty persisting alongside continued foreign net selling, a break below the 5,200 level could amplify downward pressure and deepen volatility," said Lee Gyeong-min, an analyst at Daishin Securities. "It will be important to watch whether the 5,200 level holds, whether foreign selling subsides, and whether sentiment toward semiconductor stocks recovers."

The sharp decline was rooted in policy uncertainty surrounding the AI industry following the US midterm elections. The Democratic Party's victory fueled fears of a moratorium on new data center construction and tighter regulations on power consumption, spreading selling pressure across semiconductor shares.

SK hynix tumbled 9.46% to close at 1.26 million won on Thursday. Samsung Electronics fell 7.57% to finish at 201,500 won. SK Square dropped 10.01% and Samsung Electro-Mechanics shed 15.34%.

Even as selling spread across the broader market, funds flowed into biotech, financial and automotive stocks, creating a divergence among sectors. Hyundai Motor rose 3.53% and KB Financial Group gained 3.63%.

The Kosdaq closed down 36.54 points, or 5.11%, at 678.41. A sell-side sidecar was also triggered on the Kosdaq market at 2:27:31 p.m. after Kosdaq 150 futures prices fell sharply.

On the Kosdaq, foreign and institutional investors posted net selling of 73.3 billion won and 102.8 billion won, respectively. Retail investors were the sole net buyers, picking up 172.2 billion won.

Among the top Kosdaq stocks by market capitalization, Simtech fell 18.00%, EO Technics dropped 16.20% and Jusung Engineering declined 12.20%.