Kospi Slides as Much as 4.8% on Foreign Selling as Treasury Yields Rise, AI Investment Fears Grow

South Korea’s Kospi fell more than 4% intraday as rising U.S. Treasury yields and concerns about overheating investment in the artificial intelligence industry weighed on sentiment.

Bloomberg reported on October 20 that the Kospi dropped as much as 4.8% during the session. Semiconductor heavyweights including Samsung Electronics Co. and SK Hynix Inc. led the decline, while all but one sector traded lower.

Foreign investors also sold heavily. They were net sellers of $480 million worth of Kospi shares in the first two hours of trading. The move followed a 7-basis-point rise in the U.S. 10-year Treasury yield to near 5.14%, which damped appetite for risk assets.

Concerns about excessive investment in AI and rising funding burdens also weighed on equities. After rebounding a day earlier, the Kospi turned lower again, leaving it down about 40% from the record high reached in June.

"Heavy indiscriminate selling is emerging across almost all stocks," Hur Jae-hwan, an analyst at Eugene Investment & Securities, said. He added that the market remained highly fragile, with even battery-related shares that had led the previous day’s rebound falling again.

Ellice, a data-center infrastructure company that listed on the Kosdaq on October 20, plunged more than 30% on its trading debut. Growing skepticism about AI infrastructure companies’ ability to raise capital is also increasing pressure on initial public offerings in the sector.

Debate is also continuing over the possibility of a U.S. listing for Solidigm, an SK Hynix subsidiary. South Korea’s financial authorities are reviewing whether a Solidigm U.S. IPO would amount to a dual listing, in which a listed parent company and its subsidiary trade separately on stock markets. Such listings have drawn opposition from retail investors because of concerns over damage to shareholder value at the parent company.