South Korean stocks plunged nearly 4 percent Friday, ending a four-day winning streak, as fading hopes for a near-term rate cut triggered heavy selling. Foreigners and institutions led the sell-off, while retail investors switched to buying. The Korean won strengthened sharply against the U.S. dollar.
The benchmark Korea Composite Stock Price Index (KOSPI) sank 159.06 points, or 3.81 percent, to 4,011.57 on November 14. Trading volume was moderate at 396.5 million shares worth 17.9 trillion won (US$12.3 billion), with losers outnumbering winners 717 to 169. Foreigners and institutional investors were net sellers, offloading 2.4 trillion won and 900.2 billion won in shares respectively, while retail investors turned net buyers, purchasing 3.2 trillion won after four sessions of selling.
"Changes in rate cut expectations weighed down on stocks and the tech sector. Stock markets globally are facing downward pressure, especially over concerns that the artificial intelligence (AI) sector may be in a bubble," said Lee Kyoung-min, an analyst at Daishin Securities. Recent hawkish comments from U.S. Federal Reserve board members on December rate cut prospects fueled risk-averse sentiment, Lee added.
The decline occurred despite a joint fact sheet announced by South Korea and the United States on trade and security deals reached over two weeks since their summit in Gyeongju. The U.S. agreed to reduce tariffs on Korean cars and auto parts from 25 percent to 15 percent and apply semiconductor tariffs no less favorable than those for competitors like Taiwan. Seoul and Washington also signed a memorandum of understanding on Seoul's US$350 billion investment pledge, including $150 billion into America's shipbuilding sector.
Most large-cap shares fell. Samsung Electronics shed 5.45 percent to 97,200 won, SK hynix dipped 8.5 percent to 560,000 won, LG Energy Solution fell 4.44 percent to 463,000 won, Hyundai Motor dropped 2.15 percent to 272,000 won, and Naver declined 4.52 percent to 253,500 won. Shipbuilder HD Hyundai Heavy Industries rose 3.17 percent to 586,000 won, buoyed by expectations of U.S. partnerships.
By 11:20 a.m., the KOSPI had fallen 103.02 points, or 2.47 percent, to 4,067.61, tracking U.S. tech declines where the Nasdaq sank 2.29 percent. Citibank forecasted a "Goldilocks" economy for South Korea next year, raising its KOSPI target to 5,500 from 3,700, citing eased trade uncertainties, strong semiconductor exports, and market reforms.
The Korean won traded at 1,457 to the U.S. dollar by 3:30 p.m., up 10.7 won, rebounding from near its 16-year low after authorities pledged foreign exchange stabilization measures. Bond yields rose, with the three-year Treasury at 2.944 percent (up 1.2 basis points) and the five-year at 3.126 percent (up 4.2 basis points).