Buybacks end as foreigners post record net selling

CoreWeave, Anthropic fuel fresh AI bubble fears

Rough road ahead as market seeks rebound footing

Big Tech earnings and Anthropic's November IPO in focus

[Getty Images Bank]
[Getty Images Bank]

South Korean stocks collapsed last week. Indexes that had been grinding sideways for months suddenly plunged, spreading fear across the market. The Kospi and Kosdaq staged a partial recovery toward the end of the week, but analysts warn it is too early to call a bottom.

The Kospi closed Friday at 5,668.05, down 957.88 points, or 14.46 percent, from the previous week, according to Korea Exchange.

The index tumbled more than 3 percent on Monday, the first trading day of the week, then slid another 5.46 percent Tuesday, crashing through the 6,000 level within days.

A modest 0.44 percent decline Wednesday briefly suggested the index might be finding a floor around 6,000, but Thursday brought another sharp drop of 7.57 percent, pushing the Kospi below 5,500. During that session, circuit breakers were triggered on both the Kospi and Kosdaq markets, halting trading for 20 minutes.

In total, the Kospi fell for seven consecutive trading sessions from Oct. 6 through Thursday, shedding 1,449.52 points — a decline of 20.70 percent.

Over any seven-session stretch, the Kospi has recorded a steeper drop on only three occasions: during the Asian financial crisis in December 1997 (minus 25 percent), the global financial crisis in October 2008 (minus 31 percent), and the COVID-19 shock in March 2020 (minus 25 percent).

Doubts about the profitability of the AI industry drove the selloff. Negative news arrived in quick succession: the corporate bonds of AI cloud provider CoreWeave tumbled into distressed territory, and Anthropic — a leading developer of frontier AI models — reported that its third-quarter sales growth slowed sharply quarter-on-quarter.

Major stock markets worldwide turned lower in response, with AI and semiconductor shares leading the retreat.

What made the Korean market's decline particularly painful was its starting point. Unlike the United States and Taiwan, which had already recovered from the July selloff and were trading near or above prior highs, the Kospi had spent two months lagging and remained in undervalued territory — yet it still fell harder than its peers.

Over the past week, the NASDAQ fell 4.48 percent and the Philadelphia Semiconductor Index dropped 11.41 percent. Japan's Nikkei 225 and Taiwan's TAIEX lost 5.37 percent and 4.47 percent, respectively. Over the same period, the Kospi and Kosdaq fell 14.46 percent and 10.93 percent.

Analysts point to two factors behind the outsized decline in Korean stocks: a structural concentration problem — Samsung Electronics and SK hynix together account for roughly half of the Kospi market capitalization — and a severe supply-demand imbalance.

A large share of retail investors have been trapped in losing positions since the July selloff, while institutional buyers including pension funds have had limited capacity to absorb selling. That left the market with no meaningful counterweight to heavy foreign selling.

Against that backdrop, Samsung Electronics' large-scale share buyback program ended Oct. 7, and SK hynix's share buyback and cancellation program was also winding down. With those key supports removed, the index accelerated its decline.

From Jan. 2 through Friday, foreign investors recorded net selling of 208.33 trillion won ($154 billion) in the domestic stock market. Over the same period, institutional and retail investors posted net purchases of only 40.13 trillion won and 101.06 trillion won, respectively.

On Friday, the final trading day of last week, AI and semiconductor stocks tumbled again on Wall Street, pulling all three major indexes lower.

The Dow Jones Industrial Average fell 0.34 percent and the S&P 500 slipped 1.09 percent. The tech-heavy NASDAQ Composite tumbled 2.15 percent, while the Philadelphia Semiconductor Index fell 3.83 percent.

Friday's NASDAQ decline was the steepest since July 23. The Philadelphia Semiconductor Index fell for eight consecutive sessions — its longest losing streak since the 2008 global financial crisis.

CoreWeave dropped 11.91 percent as credit concerns resurfaced, dragging other major neo-cloud providers down by double digits. Micron fell 5.63 percent, Broadcom lost 4.52 percent, SK hynix's American depositary receipts declined 6.58 percent, and AMD shed 5.95 percent.

Big Tech names also retreated sharply: Meta fell 3.72 percent, Alphabet lost 2.47 percent and Microsoft declined 1.93 percent.

Indicators tracking Korean market sentiment fell across the board. The MSCI Korea exchange-traded fund dropped 3.70 percent, while the MSCI Emerging Markets ETF fell 1.74 percent.

Alongside the Philadelphia Semiconductor Index's 3.83 percent decline, the Russell 2000 fell 1.66 percent and the Dow Jones Transportation Average lost 1.13 percent. KOSPI 200 overnight futures closed down 3.50 percent.

Given this environment, the domestic stock market is expected to face continued headwinds this week.

Earnings from major companies including Samsung Electronics and SK hynix remain solid, but pressure from foreign investor flows is still significant.

"Considering geopolitical risks and the US midterm election calendar, the market needs time to find its direction," said Lee Sang-jun, a researcher at NH Investment & Securities. "If it becomes clear that the CoreWeave situation is a company-specific issue rather than a problem for the AI industry as a whole, semiconductors could stage a sharp rebound."

On Monday (local time), the Gartner IT Symposium in Orlando, Florida, is expected to focus on the pace of corporate AI adoption, investment costs, and actual productivity and return on investment.

Nvidia's annual developer conference, GTC, runs Tuesday through Thursday, while major companies including Meta, Lam Research, IBM, Texas Instruments and Western Digital are also scheduled to report earnings during the week.

Some analysts also suggest that once Anthropic's initial public offering, planned for early November, is completed, capital reallocation ahead of the listing will wind down and selling pressure from foreign investors may ease.

"The period after Anthropic's listing in mid-November is worth watching," said Kim Jae-seung, a researcher at Hyundai Motor Securities. "Before the listing, concerns about foreign capital outflows tied to the large IPO could intensify. After it, the supply-demand overhang should ease and uncertainty about AI profitability should diminish, which could broaden foreign investor sentiment."


jiyun@heraldcorp.com