(News Focus) AI rout prompts KOSPI to tumble below 5,000 after U.S. midterm elections

SEOUL, Nov. 6 -- The South Korean KOSPI index fell below 5,000 points on Friday, driven by concerns that a Democratic Party triumph in the U.S. midterm elections might hinder artificial intelligence (AI) data center development. The market sell-off followed a decline on Wall Street, causing the KOSPI to drop more than 8 percent and prompting a 20-minute trading suspension, marking the first such halt in 16 sessions.

Samsung Electronics and SK hynix, together responsible for almost half of the KOSPI market, saw their shares drop by over 10 percent at the start. Analysts predict that the power of U.S. President Donald Trump, due to end in two years, will be reduced if Democrats secure majorities in both the Senate and House. A crucial factor to monitor is whether a Democrat-controlled Congress will slow down AI data center construction.

The Democratic Party's victory, particularly in Texas, a state central to AI data center expansion, caused the NASDAQ to fall more than 5 percent overnight. Analysts anticipate heightened volatility in South Korean markets following the significant drop. The fear gauge for the South Korean stock market surged after the tech sell-off on Wall Street impacted global markets.

The KOSPI 200 volatility index reached a three-month peak of 64.74 on Friday, as reported by the Korea Exchange. Daishin Securities, in a research note, suggested that the market's response to the AI-driven decline may have been overly exaggerated, but the probability of completely halting AI data center construction is low. Finance Minister Lee Hyoung-il pledged to implement measures to counter excessive market volatility, stating that South Korea will closely monitor external uncertainties but affirm that the nation's economic fundamentals remain robust. Lee also referenced expert predictions that global investments in AI are likely to persist.