Seoul, Nov 5 (SocialNews.XYZ) After a staggering advance for the past few months, South Korea's stock market crashed on Wednesday, bearing the brunt of fears over the overvaluation of tech stocks amid an artificial intelligence (AI) boom.
Stung by the fears over valuation, the country's benchmark index, the Korea Composite Stock Price Index (KOSPI), sank 117.32 points, or 2.85 percent, to 4,004.42, after dipping to as low as 3,867.81 at one point on Wednesday. The market capitalisation on the main bourse declined 97 trillion won (US$67 billion), reports Yonhap news agency.
The market rout triggered a sidecar, to suspend stock trading for 5 minutes in the morning session.
The market crash came after the country's stock market had rallied nearly 80 percent since April this year, the best-performer among major economies, led by gains in chipmakers, defence firms and shipbuilders.
Top cap Samsung Electronics has gained almost 80 percent, and its rival SK hynix almost tripled.
"AI-related stocks have led the bull market in the U.S. but there are growing concerns about when these companies will be able to make profits from their mass investments," Samsung Securities said in a report. "Local stocks followed declines on Wall Street, led by profit taking in the tech sector," it added.
Foreign investors' selling spree continued following the previous session, by dumping a net 2.5 trillion won worth of local stocks, the largest since Aug. 13, 2021.
In contrast, retail investors scooped up a net 2.5 trillion won. Overnight, U.S. stock indexes closed lower, with the S&P 500 dipping more than 1 percent and the tech-rich Nasdaq sinking by more than 2 percent.
Jitters over a tech bubble persisted after the heads of Goldman Sachs and Morgan Stanley warned that the stock market is entering a correction.
Analysts here said that while the KOSPI could be entering a correction phase, the adjustment would not last for a long time.
"Market volatility could increase in the short haul, but this does not mean an entry into a medium-to-long-term correction phase," said Lee Jae-won, an analyst from Hana Securities.
Lee argued that the local stock market has a number of things ahead to help upward momentum, including the upcoming revision to the Capital Markets Act, aimed at boosting shareholder returns.
Samsung Securities said the upbeat outlook for South Korean companies, especially its chipmakers, is likely to boost the KOSPI again going forward.
"The earnings outlook for local companies remains positive, as well as exports and the profitability of semiconductor products, which has improved in October. Robust profit momentum is expected to continue in the Korean stock market," the brokerage said.
—IANS
na/
Source: IANS
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