Korean Stocks Plunge Amid Sudden Sell-Off in Technology Shares

South Korean Stocks Plummet Amid Rotation Out of AI Beneficiaries

South Korean stocks took a steep nosedive on Monday, led by significant losses in chipmaker shares as investors intensified their rotation out of artificial intelligence beneficiaries. The Kospi sank as much as 8.8% early in the day, marking a decline from its recent peak of approximately 15%. This decline is poised to enter a technical correction.

Memory maker Samsung Electronics Co. fell as much as 11%, while its peer SK Hynix Inc. slid 10%. The sudden plunge triggered a circuit breaker, halting trading. In response, the Korea Exchange convened an emergency meeting on Monday to assess rising volatility and discuss measures to ensure stable market operations.

Concerns over the overheating of the AI rally, combined with uncertainty in the macro environment, have led to a decline in global tech stocks over the past few sessions. Korea is experiencing outsized losses after its world-beating gains, with the Kospi still up 77% since the start of the year.

Read also: Three Indian IPOs Scheduled for Listing on Dalal Street This Week.

Foreign investors have been fleeing, selling more than $10 billion worth of Kospi shares on a net basis last week alone. This selling pressure has put a strain on the won, with the currency touching its weakest level against the dollar since March 2009.

The South Korean market faces a heightened risk of a "Black Monday" event, with "currency instability, interest-rate repricing, and profit taking in semiconductors all happening at the same time," according to Kim Doo-un, an analyst at Hana Securities.

In response to the market turmoil, the government on Sunday announced a series of targeted measures to bolster the won, pledging firm action against speculative trading and other activities. These moves come as policymakers across Asia step up efforts to support their currencies amid rising energy costs and a stronger dollar stemming from the Iran war.

Read also: Momentum Stocks Decline: TCS, RVNL, eClerx Services, and SBI Cards Reach 52-Week Lows

Note: The table shows the comparison of the recent peak and current level of the market indices mentioned in the article.