(LEAD) Seoul shares crash over 7 pct on chip rout amid AI, inflation woes

Seoul's stock market saw a significant drop of over 7% on Thursday due to losses in key chipmakers, fueled by worries over the viability of artificial intelligence investments and Federal Reserve interest rate hikes. The Korea Composite Stock Price Index (KOSPI) tumbled 7.57% to close at 5,554.22 points, marking its seventh consecutive day of decline.

The Korea Exchange temporarily suspended selling for five minutes as the KOSPI 200 futures slipped more than 5% in a single minute. The market's sharp decline prompted a 20-minute trading halt after the index fell over 8% from the previous day's close. Earlier, U.S. stocks declined as questions about the durability of AI-related spending and unexpectedly high September inflation data dampened investor confidence.

The U.S. Consumer Price Index rose 0.6% in September, the highest monthly increase since April, raising concerns that inflation could prompt the Federal Reserve to raise interest rates. Trade volume remained modest at 363.47 million shares, worth 26.87 trillion won ($19.97 billion), with more sellers than buyers—787 to 112. Foreign institutional and individual investments dropped by 3.62 trillion won and 1.69 trillion won, respectively, while domestic investors bought a combined 1.69 trillion won and 1.29 trillion won.

Analyst Lee Kyoung-min of Daishin Securities attributed the market's volatility to concerns over AI investments, increased competition in memory chip production, and rising borrowing costs. Semiconductor shares suffered, alongside IT hardware and power equipment stocks due to weakened sentiment towards the broader AI value chain.

Major market players experienced substantial losses, with Samsung Electronics falling 9.48% to 210,000 won, SK hynix falling 11.06% to 1.26 million won, SK Square—parent of SK hynix—dropping 10.21% to 765,000 won, and Samsung Electro-Mechanics sinking 15.36% to 1.16 million won. The Korean won traded at 1,344.6 per U.S. dollar, a 2.3 won decrease from the previous trading session's close.