KOSPI Drops 5.4%, Investors Reassess AI Prospects

Illustration of the South Korean flag. The KOSPI index fell 5.4 percent after technology stocks weakened and investors reassessed the prospects for artificial intelligence or AI-based trading. Illustration photo: Pexels.

JAKARTA - Seoul shares fell sharply in Wednesday's trading. Pressure came from technology stocks, after investors began reassessing the prospects of artificial intelligence (AI) based trading.

Yonhap quoted Wednesday, July 8, reported that the Korea Composite Stock Price Index or KOSPI benchmark index closed down 409.52 points or 5.4 percent to 7,246.79. Since the start of trading, the index has opened 2.7 percent weaker.

The transaction volume was quite large, reaching 495.75 million shares worth 41.65 trillion won or around 27.78 billion US dollars. The number of shares that fell was much more than the shares that rose, namely 763 to 124.

Most large-cap stocks were down. The pressure followed Wall Street's decline in overnight trading. The Dow Jones Industrial Average fell 0.25 percent, while the Nasdaq Composite, which is home to many technology stocks, fell 1.16 percent.

Analysts assess that the continued weakening of Korean stocks is triggered by investor concerns about large technology companies. Increased capital spending and production capacity expansion are estimated to take longer to generate profit growth.

The concern arises because the share prices of a number of technology companies are already high. The market is starting to recalculate whether large investments in AI can immediately generate commensurate profits.

In Seoul, technology stocks were the main drags on the market. Samsung Electronics fell 6.25 percent to 277,500 won. Chip giant SK hynix fell 5.68 percent to 2,076,000 won.

Pressure also spread to other major stocks. Hyundai Motor fell 3.55 percent to 462,500 won. Hanwha Aerospace weakened 7.22 percent to 1,041,000 won.

Not all stocks ended in the red zone. Shipping company HMM rose 2.3 percent to 20,050 won. S-Oil shares also gained 3.3 percent to 131,600 won.

In the foreign exchange market, the Korean won strengthened against the US dollar. The won was traded at 1,498.5 won per US dollar at 15.30 local time, up 29.7 won from the previous session.

Bond prices closed mixed. Bond prices move in the opposite direction to yields. The yield on the three-year government bond fell 0.5 basis points to 3.775 percent. The yield on the benchmark five-year government bond was unchanged at 3.999 percent.