The KOSPI plunged below the 4,000 mark in a single day, triggered by massive selling by foreign investors. This drop is attributed to renewed concerns about a bubble in artificial intelligence (AI) technology stocks, dampening investor sentiment.
On November 21, the KOSPI closed at 3,853.26, down 151.59 points (3.79%) from the previous day. The index, which began the day with a downward trend, fell to 3,838.46 at one point during the session. The KOSPI's return to the 3,850s in a single day appears to have been driven by concentrated foreign selling, coupled with the previous day's sluggish performance of U.S. technology stocks.
This decline was influenced by a 3.15% drop in the stock price of Nvidia, a leading US semiconductor company and AI player. The previous day, the KOSPI had surpassed the 4,000 mark on expectations for Nvidia's earnings. However, the market took note of the surge in accounts receivable following the earnings announcement, interpreting it as a sign of slowing growth. As these concerns spread, leading domestic semiconductor stocks SK Hynix and Samsung Electronics plummeted by 8.76% and 5.77%, respectively, and the selling pressure spread across all AI-related stocks.
Foreign selling increased downward pressure across the stock market. On this day, foreign investors net sold KRW 2.8289 trillion worth of stocks, the largest amount since February 2021, approximately four years and nine months ago. Conversely, individuals and institutions net purchased KRW 2.2929 trillion and KRW 495.5 billion, respectively, to defend the index, but it wasn't enough. The surge in the KRW/USD exchange rate, up KRW 7.7 from the previous day to KRW 1,475.6, also fueled the exodus of foreign investors. A high exchange rate reduces foreign exchange returns, reducing the attractiveness of foreign investment.
The KOSDAQ market was not spared from this impact. The KOSDAQ index closed at 863.95, down 27.99 points (3.14%). Foreign investors and institutions net sold KRW 128.1 billion and KRW 79.1 billion, respectively, while growth stocks such as Ecopro BM and Rainbow Robotics all underperformed.
This sharp decline could trigger a shift in investor sentiment, as it could dampen long-held expectations for AI investment. For the time being, changes in global technology stock supply and demand and exchange rate trends are expected to remain key variables in the domestic stock market. Analysts suggest that a certain rebalancing could occur in the market structure, which is centered around AI growth stocks.
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