Democratic sweep sparks AI regulation fears

Index tumbles more than 4% intraday before rebounding to close at 5,683.80

Foreign investors dump 2.5 trillion won; retail and institutional buyers step in

Samsung Electronics, SK hynix recover most of their losses

Battery and solar stocks surge on policy-benefit expectations

A screen at the Woori Bank dealing room in Jung-gu, Seoul, shows footage related to the US midterm elections alongside the Kospi and other market data on Wednesday. [Yonhap]
A screen at the Woori Bank dealing room in Jung-gu, Seoul, shows footage related to the US midterm elections alongside the Kospi and other market data on Wednesday. [Yonhap]

The Kospi swung wildly Wednesday, plunging more than 4 percent intraday on fears that US midterm election results could bring tighter regulation of the AI industry, before clawing back losses to close marginally higher on buying by retail and institutional investors.

Foreign investors sold a net 2.5 trillion won ($1.86 billion) worth of shares, but secondary battery and solar stocks surged on expectations of policy benefits, helping lift the index off its lows.

The Kospi closed up 35.01 points, or 0.62 percent, at 5,683.80, according to Korea Exchange. The index opened sharply higher, rising 2.43 percent to 5,786.13, and climbed as far as 5,828.13 — a gain of 3.17 percent — in early trade. It then reversed course and fell as low as 5,421.72, a drop of 4.02 percent, before staging a recovery to end the session with a slim gain.

Foreign investors dumped shares worth more than 2 trillion won, but retail and institutional buyers absorbed the selling pressure and supported the index. Foreign investors posted net selling of 2.5 trillion won on the day, while retail and institutional investors recorded net purchases of 1.14 trillion won and 1.01 trillion won, respectively. Other corporate entities were net buyers of 349.3 billion won, partly reflecting SK hynix's additional share buyback.

The Kospi opened higher as large-cap domestic semiconductor stocks rose, tracking a rebound in technology shares on Wall Street overnight.

AMD's record third-quarter earnings — driven by a surge in demand for AI data center chips — and fourth-quarter guidance that beat market expectations sent its shares sharply higher in both regular and after-hours trading, providing a tailwind for Korean markets.

The gains evaporated, however, as US midterm vote counting got underway and Nasdaq 100 futures turned lower, draining the Kospi of upward momentum and triggering a sharp selloff.

Reports that the Democratic Party had swept both the House and the Senate, giving it full control of Congress, stoked concerns about potential regulation of AI data centers and the knock-on effect on semiconductor demand.

The selloff eased after analysts suggested that AI regulation would likely be limited to environmental levies on power consumption, and the Kospi bounced back.

Samsung Electronics and SK hynix, the two heavyweight semiconductor stocks, tumbled as much as 5 to 6 percent intraday but recovered most of their losses, ending the regular session down 0.68 percent and 0.14 percent, respectively.

Among other large-cap stocks, Samsung Electro-Mechanics rose 0.90 percent, Samsung Biologics gained 2.96 percent and Hyundai Motor advanced 2.16 percent, while Samsung Life Insurance fell 0.57 percent, Samsung C&T slipped 0.16 percent and Hanwha Aerospace declined 0.68 percent.

Stocks seen as beneficiaries of a Democratic sweep surged. LG Energy Solution jumped 5.03 percent and Samsung SDI soared 11.57 percent among secondary battery names, while Hanwha Solutions climbed 18.64 percent and OCI Holdings rose 10.38 percent among solar-related stocks.

Kosdaq also closed higher, gaining 10.56 points, or 1.50 percent, to finish at 714.95. The index opened up 11.35 points, or 1.61 percent, at 715.74, gyrated alongside the Kospi during the session and ultimately ended with a gain. On the Kosdaq, retail investors and foreign investors were net sellers of 51.8 billion won and 700 million won, respectively, while institutions were net buyers of 63.2 billion won.

Among major Kosdaq stocks, Ecopro rose 9.54 percent, Ecopro BM gained 10.96 percent and Jusung Engineering advanced 7.74 percent, while Alteogen fell 4.45 percent, Rainbow Robotics edged down 0.29 percent and HLB tumbled 17.69 percent.

The won weakened slightly against the dollar. The won-dollar exchange rate stood at 1,341.5 won per dollar as of 3:30 p.m. in the Seoul foreign exchange market, up 0.5 won from the previous session.


th5@heraldcorp.com