South Korea's benchmark KOSPI tumbled again on Oct. 20 as foreign and institutional investors sold in tandem, reversing two straight sessions of gains that had raised hopes of a recovery. Investor sentiment weakened as uncertainty over the profitability of artificial intelligence investments persisted, compounded by rising global interest rates and a stronger won.
The KOSPI closed at 5,552.74, down 215.27 points, or 3.73%, from the previous session, according to the Korea Exchange. The index opened at 5,733.57, down 34.44 points or 0.60%, and at one point fell as low as 5,493.24, briefly giving up the 5,500 level. On the main board, foreign investors sold a net 530.3 billion won and institutions a net 1.005 trillion won, for combined net selling of 1.5355 trillion won. Retail investors bought a net 898.9 billion won, absorbing the supply, but that was not enough to halt the decline.
Large-cap stocks fell across the board. Samsung Electronics closed at 211,500 won, down 2.98%, while SK hynix ended at 1.223 million won, down 4.23%. SK Square fell 5.00%, Hyundai Motor 4.91% and LG Energy Solution 4.17%. Samsung Electronics preferred shares slipped 2.93%, Samsung Electro-Mechanics 1.28% and Samsung Biologics 2.52%.
"Profit-taking following the previous session's rebound came to market, turning stocks weaker again," said Lee Kyoung-min, an analyst at Daishin Securities. "Semiconductor stocks, whose rebound had been limited the previous day, saw relatively smaller declines, while losses widened in sectors that had rallied the day before, such as defense, shipbuilding and nuclear power."
Analysts cite distrust of the AI investment cycle and fragile supply-demand conditions as reasons the domestic market fell especially hard. Although the Nasdaq composite and the Philadelphia Semiconductor Index rose 1.11% and 1.61% respectively on Wall Street overnight, concerns over how AI infrastructure companies are raising funds and whether they can turn a profit remain unresolved. Rising international oil prices and government bond yields in major economies, driven by political and fiscal instability in France and geopolitical tensions in the Middle East, also weighed on the market. In addition, the won-dollar exchange rate fell below 1,330 won, raising concerns about the earnings of exporters.
"To turn around weakened sentiment, the market needs catalysts such as a perception that share prices have fallen far enough and a resolution of doubts about the earnings of market leaders," said Han Ji-young, an analyst at Kiwoom Securities. "In terms of price levels, our view is unchanged that the market is in oversold territory marked by panic selling, so investors should hold on and watch the third-quarter earnings season."
The KOSDAQ, meanwhile, closed at 781.97, down 26.92 points or 3.33% from the previous session, giving up the 800 level on a closing basis just one day after reclaiming it. Foreign investors sold a net 183.8 billion won and institutions a net 110.6 billion won, while retail investors alone bought a net 294.2 billion won.