Kospi Drops 3.65%, Falls Below 6,400 as AI Concerns, Earnings Caution Weigh
Summary
- The Kospi fell 3.65%, breaking below the 6,400 level, while the Kosdaq also plunged nearly 5%.
- Weaker investor sentiment was driven by concerns over profitability in the AI industry, expectations for slowing third-quarter earnings growth, and geopolitical instability in the Middle East.
- Amid heavy net selling by foreign and institutional investors, large-cap semiconductor stocks and major Kosdaq names posted sharp losses.
Forecast Trend Report by Period
South Korean stocks tumbled on the first trading day after the Hangeul Day holiday, hit by concerns over profitability in the artificial intelligence industry and caution ahead of corporate earnings. The Kospi fell below the 6,400 mark for the first time in two months, while the Kosdaq sank nearly 5%.
On Oct. 12, the Kospi closed at 6,384.24, down 241.69 points, or 3.65%, from the previous session. It was the first close below 6,400 since Aug. 11. The benchmark has now declined for four straight trading days since Oct. 6.
Concerns that spread through U.S. markets during the holiday period also hurt sentiment in South Korea. OpenAI said annualized revenue was approaching $50 billion as of late last month. That fell short of the roughly $70 billion level previously discussed in the market, fueling concern about the AI industry's ability to generate profits.
Caution ahead of third-quarter earnings for South Korean companies also weighed on the market. IBK Investment & Securities said operating profit at 151 Kospi 200 companies with available estimates is forecast to rise 243% from a year earlier and 6% from the previous quarter. Still, the brokerage said profit growth appears to have peaked in the first half and is now slowing.
“The third quarter will be the first quarter in which earnings growth versus both a year earlier and the previous quarter has moved past its peak,” Byun Jun-ho, an analyst at IBK Investment & Securities, said. He added that a slowdown in earnings growth could weaken investor sentiment.
Geopolitical unrest in the Middle East added to the pressure. Casualties were reported in Saudi Arabia after a missile attack by Yemen's Houthi rebels, and the possibility of a U.S. response came back into focus after an American was among the dead.
Foreign selling was pronounced. On the main bourse, foreign investors were net sellers of 2.019 trillion won, while institutions sold a net 111 billion won. Retail investors were net buyers of 1.467 trillion won.
Large semiconductor shares were not spared. Samsung Electronics fell 4.39% and SK Hynix dropped 4.52%. Other major stocks also declined, including SK Square, down 6.29%, Samsung Electro-Mechanics, down 3.82%, Hyundai Motor, down 1.39%, and LG Energy Solution, down 0.75%.
The Kosdaq posted even steeper losses. The index closed at 849.19, down 4.83% from the previous session. Institutions and foreign investors were net sellers of 223 billion won and 27 billion won, respectively, while retail investors were net buyers of 249 billion won.
Ecopro BM plunged 10.25%, Leeno Industrial fell 11.15%, Simmtech dropped 10.36% and Samchundang Pharm slid 12.73%. Ecopro lost 8.49%, Rainbow Robotics fell 8.86%, and Jusung Engineering dropped 5.42%.
The won strengthened against the dollar. At 3:30 p.m. in Seoul, the currency traded at 1,335.1 won per dollar, up 7.7 won from the previous session.
