South Korea’s benchmark KOSPI index plunged 4.1 percent to 3,950.96, falling back below the 4,000 mark just seven trading days after breaking it for the first time in history. The small-cap KOSDAQ tumbled even further, down 4.4 percent to 886.00.
The downturn was led by heavyweight chipmakers. Samsung Electronics dropped 5.5 percent to 99,100 won ($68), while SK Hynix sank 7 percent to 545,000 won. Foreign investors sold a net 212.1 billion won worth of shares, while retail investors — who had bought more than 2 trillion won the previous session — continued to purchase stocks, adding 102 billion won, offering only limited support to the market.
Analysts attributed the rout to overnight weakness on Wall Street, where concerns about stretched valuations in artificial intelligence stocks triggered a broad sell-off. The Dow Jones Industrial Average, S&P 500 and Nasdaq all retreated on Tuesday, while AI beneficiary Palantir plunged 7.9 percent amid warnings it had become overvalued.
Adding to the pressure, reports emerged that Michael Burry — the investor famed for profiting from the 2008 subprime mortgage collapse — had placed bets against Palantir and Nvidia, two of the most high-profile names in the AI rally.
Lee Kyung-min, an analyst at Daishin Securities, said that while the long-term outlook for Korea’s leading growth stocks remains strong, short-term corrections are becoming increasingly likely. “The market may test lower levels around 3,700 on the KOSPI, corresponding to a forward price-to-earnings ratio of about 10.3 times,” he noted.
Japan’s Nikkei 225 also declined, falling 2.4 percent to 50,238.38, tracking losses in Seoul.
CNBC reported that the slump in Asian equities followed warnings from Goldman Sachs and Morgan Stanley urging investors to brace for a market pullback over the next two years.
“It’s likely there’ll be a 10 to 20 percent drawdown in equity markets sometime in the next 12 to 24 months,” Goldman Sachs chief executive David Solomon said at the Global Financial Leaders’ Investment Summit in Hong Kong. “Such pullbacks happen even in positive market cycles — they don’t rewrite fundamental convictions about capital allocation.”
Morgan Stanley CEO Ted Pick, speaking on the same panel, echoed the view. “We should welcome the possibility of 10 to 15 percent drawdowns that are not driven by a macro cliff effect,” he said, calling them “healthy developments rather than signs of crisis.”
The Shanghai Composite Index fell 0.6 percent to 3,936.53, while Hong Kong’s Hang Seng Index dropped 1.2 percent to 25,655.06.
Taiwan’s TAIEX also declined 1.9 percent to 27,592.06.
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