The South Korean stock market has plunged from the 9,000s to the 4,000s for the first time in four months, driven by concerns over a slowdown in artificial intelligence (AI) investments originating from the United States. The market has seen a staggering loss of 3,395 trillion won in market capitalization. Additionally, the amount of idle funds available for investment has decreased by over 50 trillion won, leading to a sharp decline in investor sentiment.
According to the Korea Exchange, the KOSPI index fell to as low as 4,911.28 during trading on November 6. This represents a drop of 4,203.27 points (46.12%) compared to its all-time high closing of 9,114.55 on June 22. A wave of selling triggered a circuit breaker, temporarily halting trading at 9:03 a.m.
Although the index recovered slightly, it continued to trend downward. As of 2:22 p.m., the KOSPI stood at 5,103.98, which is still 44.00% lower than its peak.
The scale of the market capitalization decline is astronomical. Data from the exchange shows that the KOSPI's market capitalization has decreased by 3,224.79 trillion won since its June peak. Including the KOSDAQ and KONEX, the total market capitalization of the domestic stock market has shrunk from approximately 7,997 trillion won to 4,602 trillion won. In just over four months, corporate value amounting to 3,395 trillion won has vanished.
The amount of idle funds that could flow into the stock market is also rapidly diminishing. According to the Korea Financial Investment Association, the amount of investor deposits fell from a record high of 139.69 trillion won on June 4 to 89.23 trillion won on November 4. This represents a decrease of 50.47 trillion won, or 36.13% of the total.
In response, the government has initiated emergency measures. Starting November 9, it will exempt securities firms from the requirement to maintain a collateral ratio of 140% for margin loans for three months. This is aimed at breaking the vicious cycle of forced selling due to stock price declines.
However, some analysts believe that concerns over a slowdown in AI investments may be overstated. Lee Kyung-min, a researcher at Daishin Securities, stated, "While differentiation based on individual companies' profitability and funding capabilities is inevitable, this does not necessarily mean the end of the AI investment cycle." He anticipates that the market will attempt to reverse its momentum as it assesses U.S. inflation indicators and core earnings results.
* This article has been translated by AI.
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