(URGENT) Seoul shares plunge over 5 pct on AI regulation concerns after U.S. midterms

South Korean stocks experienced a sharp decline of over 5 percent on November 5 following the Democratic Party's significant victory in the U.S. midterm elections. This "blue wave" result raised worries about stricter regulations on artificial intelligence (AI) investments. The Korea Composite Stock Price Index (KOSPI) dropped 300 points, or 5.28 percent, closing at 5,383.80.

The index had opened lower by 1.82 percent. Program trading for KOSPI-listed shares was suspended for five minutes due to heavy selling, with trade volume at 256.8 million shares valued at 22.6 trillion won (US$16.8 billion). Foreign investors sold a net of 3.39 trillion won worth of shares, while domestic institutions and individuals added a net of 841.8 billion won and 2.28 trillion won, respectively.

Analyst Kim Seok-hwan of Mirae Asset Securities noted that the Democratic Party's control of both chambers of Congress could lead to tighter regulations on AI data centers, potentially impacting AI investments. Major technology companies such as Samsung Electronics, SK hynix, and Hanmi Semiconductor saw substantial losses, with Samsung Electronics falling 7.57 percent and SK hynix dropping 9.46 percent.

Despite the overall decline, some sectors, like carmaker Hyundai Motor and carrier SK Telecom, managed to gain. The Korean won against the U.S. dollar weakened to 1,342.1 won, a drop of 0.6 won from the previous session's close. Bond prices rose, with yields on three-year and five-year government bonds falling by 4.5 basis points and 6.8 basis points, respectively.