Kospi Closes Down 6% as Seoul Eases Margin Loan Rules and Signals More Support

The Kospi fell about 8% soon after the open, setting off a 20-minute trading halt on the main board, and dropped below 5,000 during the session for the first time since February, according to The Kyunghyang Shinmun. Institutional buying lifted it back above that level by the close. The Kosdaq ended 5.03% lower at 644.27, its weakest finish since April 9 last year, and sell-side sidecars, which pause programme trading, were triggered on both boards for a second straight day. It was the first 20-minute halt on the Kospi in 16 trading sessions.

The scale of the fall reflects how closely Korea's market is tied to spending on AI hardware. SK hynix, a leading supplier of memory chips for AI accelerators, dropped 10.44% to 1,132,000 won, and Samsung Electronics lost 6.35% to 188,700 won. Both closed at their lowest levels since April.

Memory Makers Lead the Fall

Foreign investors were net sellers of 2.769 trillion won on the main board, their sixth consecutive session of net selling, and sold a net 1.9205 trillion won of SK hynix shares alone, the Kyunghyang Shinmun reported. Institutions bought a net 1.7041 trillion won and individual investors 601.0 billion won.

The selling followed Thursday's 5.52% fall in the Nasdaq Composite, in which SanDisk lost 22.26% and Micron 17.46%. Investors are pricing in the possibility that Democratic majorities in both chambers of the US Congress will slow data centre construction and tighten rules on the AI industry, cutting demand for memory chips. Japan's Nikkei 225 fell 5.96% on Friday and Taiwan's Taiex 4.51%.

Kim Min-gyu of KB Securities said the market had given more weight than before to comments from the Democratic winners and that uncertainty over the scope of any regulation had intensified the selling of technology stocks. Kim Seok-hwan of Mirae Asset Securities said investors should watch for concrete policy changes, foreign flows and system-driven selling, and warned that volatility could last through year-end.

Margin Rules Eased

Finance Minister Lee Hyoung-il said after an emergency meeting with the Financial Services Commission, the Financial Supervisory Service and the Bank of Korea that authorities were watching for "excessive anxiety and one-sided movement" and would take further action if volatility increased. He said the economy's fundamentals were solid and urged investors not to be overly anxious. Collateral regulation on loans used to buy stocks will be fully lifted for three months from later this month, a step meant to limit forced selling when falling prices trigger margin calls.

Earlier in the day, chairing the 276th External Economic Ministers' Meeting, Lee called the US midterms a significant turning point for the global economic and trade environment and warned that shocks from tighter AI regulation could spread to other markets, the Seoul Economic Daily reported. He said Korea's recent export strength had been driven by expanding global AI investment. Exports reached $930 billion from January to October and are expected to pass $1 trillion this month, the newspaper said.

Market participants are now watching whether authorities go further by activating the stock market stabilisation fund or imposing a temporary ban on short selling, according to the Seoul Economic Daily. Neither measure had been announced by Friday's close.