South Korean Stock Market Faces Volatility Following U.S. Midterm Results

The Korea Composite Stock Price Index (KOSPI) experienced significant downward pressure this week as investors reacted to the results of the U.S. midterm elections. The market downturn was largely driven by concerns that a Democratic Party victory could lead to stricter federal regulations concerning the development of artificial intelligence data centers.

On Thursday, the Korea Exchange (KRX) activated a sell-side sidecar for the KOSPI index at 10:16 a.m. to stabilize the market. This mechanism, which suspends program selling orders for five minutes, was triggered after the KOSPI 200 Futures Index dropped by more than 5 percent. By mid-morning, the benchmark index had fallen by 4.67 percent, reaching 5,418.15 points.

The volatility continued throughout the trading session, with major technology stocks bearing the brunt of the sell-off. Shares of SK Hynix saw a sharp decline of nearly 10 percent, while Samsung Electronics also faced heavy selling, dropping by approximately 7.57 percent. Other technology-related firms, including Samsung Electro-Mechanics and SK Square, also recorded double-digit losses during the day.

Market analysts noted that the sell-off in Seoul mirrored broader anxieties regarding the future of the technology sector. While U.S. markets saw gains in the Dow Jones Industrial Average and the S&P 500 following the election, the PHLX chip index hit a six-month low, reflecting specific investor apprehension toward the semiconductor and AI infrastructure industries.

By Friday, the situation intensified, leading the bourse operator to activate a circuit breaker for the KOSPI. Trading was halted for 20 minutes starting at 9:03 a.m. after the benchmark index plunged more than 8 percent from the previous session's close. This marked the tenth time this year that the KRX has been forced to implement such a measure to curb extreme market volatility.

The KOSDAQ market also faced similar instability, with a sell-side sidecar triggered later on Thursday afternoon. Data from the Korea Exchange indicated that the KOSDAQ 150 index had dropped by 5.43 percent, prompting a five-minute suspension of program selling orders. This event represented the 16th sell-side sidecar in the KOSDAQ market for the current year.

As of Thursday afternoon, the KOSPI index was trading at 5,388.51, representing a decline of 5.20 percent from the prior day. The persistent selling pressure highlights the sensitivity of Asian technology markets to shifts in U.S. policy, particularly regarding the regulatory environment for high-growth sectors like artificial intelligence.