The South Korean stock market experienced another sharp decline, falling over 3% due to concerns about the profitability of artificial intelligence (AI) investments, profit-taking in semiconductor stocks, and a supply gap following the end of share buybacks.
On October 22, the KOSPI closed at 5,533.77, down 3.52% from the previous trading day. Although it attempted to rebound early in the session, it failed to maintain upward momentum and remained below the 5,600 mark. The KOSDAQ also fell by 3.62%, closing at 764.10.
Large-cap semiconductor stocks led the decline, with Samsung Electronics and SK Hynix dropping 4.03% and 5.49%, respectively. The sell-off was attributed to profit-taking following the previous day's gains, as well as concerns surrounding SK Hynix's plans for a dual listing of its U.S. subsidiary, Solidigm.
Supply pressures also contributed to the index's drop. Foreign and institutional investors sold a net 399.1 billion won and 683.5 billion won, respectively, while individual investors bought a net 1.0364 trillion won, but this was not enough to prevent the decline.
The end of share buybacks by Samsung Electronics and SK Hynix further weakened the buying base. Samsung completed a 15 trillion won buyback on October 6, while SK Hynix finished a 40 trillion won buyback on October 21. Lee Kyung-min, a researcher at Daishin Securities, noted, "The end of SK Hynix's buyback has further weakened the supply buffer."
Additionally, earnings reports from major U.S. tech companies did not fully alleviate market concerns. Meta reported strong third-quarter results but did not provide specific guidance for next year's capital expenditures. The company's third-quarter free cash flow turned negative at $2.12 billion, raising doubts about whether it can sustain cash flow and profitability amid ongoing AI investment costs. Kang Jin-hyuk, a senior researcher at Shinhan Investment Corp., stated, "The performance of individual companies does not prove the overall profitability of AI investments, so the earnings season continues to be a testing period."
Geopolitical tensions in the Middle East also pressured investor sentiment. The U.S. ordered non-essential diplomatic personnel to leave Saudi Arabia, heightening concerns about potential localized military conflicts. Although the Bank of Korea's Monetary Policy Committee kept the benchmark interest rate steady at 3.00%, concerns about inflation and monetary policy did not provide sufficient catalysts for a market rebound.
* This article has been translated by AI.
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