South Korea Tries New Tactic to Steady Kospi After AI Rout Deepens

By Kwanwoo Jun

SEOUL--South Korea stepped up efforts to steady its battered stock market as an unwinding artificial-intelligence trade sent chip makers' shares sharply lower following an overnight selloff in their U.S. peers.

The benchmark Kospi index fell 6% to close at 5059.60 on Friday, paring earlier losses that triggered a brief trading halt as the global technology rout spread from Wall Street to Asia. The Nasdaq's 5.5% fall on Thursday was its worst one-day drop in more than a year.

SK Hynix shares plunged 10%, leading the semiconductor sector's declines, while Samsung Electronics fell 6.4%. The world's two-largest memory-chip makers supply high bandwidth-memory products to AI chip giant Nvidia, whose stock fell 9.3% Thursday in the U.S.

Officials in South Korea have tried repeatedly to curb volatility on the Kospi, which had been the world's best-performing market earlier in the year but has lost roughly $2.4 trillion in value since its peak in June as concerns about the valuation of AI stocks mounted among investors.

On Friday, Finance Minister Lee Hyoung-Il signaled a new tactic: a temporary loosening of collateral rules for brokerage firms.

Speaking after a meeting with financial regulators to discuss the rout, Lee said the measure aims to prevent excessive forced selling, which risks destabilizing the equities market.

South Korea's stock market is one of the most concentrated in the world, with SK Hynix and Samsung together accounting for nearly half of its value. The chip makers' outsized weighting can amplify swings on the Kospi, depending on how sentiment shifts.

The result has been a sharp rise in the number of trading suspensions in 2026, compared with previous years. On Friday, the exchange imposed a 20-minute halt on the Kospi and a separate five-minute suspension on the smaller tech-heavy Kosdaq.

When Korean indexes hit record highs earlier this year, officials raised concerns about retail investors borrowing heavily to buy stocks, particularly SK Hynix and Samsung. Many piled into single-stock leveraged exchange-traded funds after regulators loosened restrictions in May, leaving them vulnerable to margin calls--when a broker demands more cash after an asset price falls below a certain level.

Lee said Friday that brokerage firms will receive a three-month waiver from the requirement to maintain a 140% collateral ratio for margin loans.

The waiver, which takes effect from the start of next week, could be supported by additional measures to stabilize the market if volatility persists, he added.

Lee, the country's chief economic policymaker, said that South Korean fundamentals remain strong, urging investors to guard against excessive pessimism driven by unwarranted concerns.

Chip-led export growth accelerated at a stronger-than-expected pace in October, bringing the country closer to its unprecedented $1 trillion annual export target.

Some analysts have also taken the view that the market has sold off too heavily, especially as SK Hynix and Samsung are continuing to post record profits for consecutive quarters and still expect a global chip shortage to persist until 2028 and possibly by 2030.

Nomura analysts said the Kospi's valuation looks compelling and think it could rise as high as 10000 over time, with an approach toward 7500-8000 more likely in the near term.

While it acknowledged the jitters affecting equities globally, including higher interest rates and elevated oil prices, Nomura said the market can get support from AI investment and companies buying back their own stock.

SK Hynix said last month that it plans to return 100 trillion won, or about $74 billion, to shareholders this year as it reaps the windfall from surging demand for memory chips.

Samsung also reaffirmed that it will return 90 trillion won to 110 trillion won to shareholders for 2026, with details to be finalized in early 2027. So far, it has already fixed a 35 trillion won return, including 30 trillion won in third-quarter dividends.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

November 06, 2026 04:35 ET (09:35 GMT)