Korean market crash: Kospi plunges 8%, trading halted

South Korea's Kospi index plummeted by 8% on Thursday as investors abandoned AI trades amid a global dip in semiconductor shares, according to Bloomberg. The Seoul stock exchange temporarily halted trading for 20 minutes as losses intensified. Both SK Hynix and Samsung Electronics saw declines of over 9%. In Tokyo, the Nikkei 225 witnessed a drop exceeding 5%, with chip-related companies like Ibiden and Kioxia among the hardest hit.

The market-wide impact extended to Taiwan, where the Taiex fell over 3%, and China's Star 50 index hit its lowest point since April.

Two factors contributed to the sell-off: the US consumer prices surged in September at the fastest rate in five months, reaching 3.7% compared to 3.4% in August, raising concerns about accelerated Federal Reserve tightening. Simultaneously, CoreWeave shares in the US plummeted after its bonds neared distress levels, with notes due in 2032 trading at approximately 78 cents on the dollar.

Analyst Hebe Chen from Vantage Global Prime stated that Korea was experiencing the brunt of the global AI sell-off, driven by CoreWeave's funding struggles and surging US inflation, which heightened worries about rising borrowing costs. Consequently, investors began unwinding their positions in Samsung and SK Hynix.

A closely monitored gauge of chip stocks in the US has lost $1.6 trillion in market value over six consecutive days. Despite strong earnings from Samsung and ASML Holding, the nerves of investors remained unfazed. In October, foreign investors led the exodus, selling $10 billion in Kospi shares alone on Thursday morning, along with over $10 billion throughout the month.

The Kospi index is now on track for its seventh consecutive decline and its lowest close since early April. SK Hynix, once Asia's leading AI stock, has plummeted 57% from its summer high and witnessed a loss of over $660 billion in value. Its shares had surged over 1,000% in the past year. Looming debt concerns are intensifying, with SoftBank Group paying record yields to fund its AI initiatives.

Currently, the Kospi trades at a valuation of less than five times forward earnings, roughly half its level a year ago. The focus has now shifted to Taiwan Semiconductor Manufacturing Co., as its earnings are due to be reported later on Thursday. The company's shares experienced a decline of up to 2.8% in early trading. Taiwanese tech stocks have performed relatively better than their Korean counterparts in recent weeks.