KOSPI Drops 3.65% as Foreign Investors Sell Korean Stocks

South Korea's stock market suffered another sharp sell-off on Monday, October 12, as persistent foreign investor withdrawals and renewed concerns about the sustainability of artificial intelligence spending weighed on major technology shares. The benchmark KOSPI fell below 6,400 despite record quarterly earnings from Samsung Electronics, extending its decline to four consecutive sessions.

According to the Korea Times, KOSPI closed at 6,384.24, down 241.69 points, or 3.65%. The index has lost 619.50 points, or 8.85%, since October 6, falling below both the 6,500 and 6,400 thresholds during the downturn.

The technology-heavy Kosdaq also declined sharply, shedding 43.08 points, or 4.83%, to finish at 849.19. Meanwhile, the won strengthened against the US dollar, with the exchange rate falling 7.7 won to close at 1,335.1 won per dollar, according to the Korea Times.

Foreign selling has become a major source of pressure on Korean equities. Bloomberg data cited by Yahoo Finance showed that international investors had withdrawn $131 billion from South Korean stocks in 2026, the largest outflow among major Asian markets.

Trading turnover in the country's $4.3 trillion equity market had also dropped 70% from its late-May peak, while KOSPI had declined 22% in the second half of 2026, according to Bloomberg data reported by Yahoo Finance.

The reversal followed a powerful first-half rally that made KOSPI the world's best-performing major equity benchmark, largely on demand for artificial intelligence memory chips. Samsung Electronics and SK hynix, which together account for more than half of the index's weighting, have since become significant sources of market volatility.

Both chipmakers fell on Monday, with Samsung Electronics losing 4.39% and SK hynix dropping 4.52%, according to the Korea Times. The declines came despite Samsung reporting record third-quarter results, including an operating profit nearly nine times higher than a year earlier, as investors continued to question the durability of demand for AI-related semiconductors.

Kim Seok-hwan, an analyst at Mirae Asset Securities, linked the pressure on the two major chipmakers to renewed concerns about an AI bubble following reports about OpenAI.

Samsung's earnings strength has not eliminated uncertainty about the semiconductor industry's outlook. The Korea Times reported that analysts are looking for clearer evidence of competitiveness in high-bandwidth memory and stronger confidence that the current semiconductor upcycle can continue.

Lee Jae-won, an analyst at Yuanta Securities, highlighted structural differences between South Korea's technology sector and the US market when assessing future earnings growth.

"Although both markets stand to gain from rising global AI spending, their companies generate revenue differently and occupy distinct positions in the value chain," Lee said.

Lee cautioned against interpreting the market divergence as proof that South Korean chipmakers were losing their competitive position. He said investors should assess changes in global portfolio allocations, relative valuations of Korean semiconductor stocks and differing expectations for future profit growth.

South Korea is also facing competition for investment from Taiwan, where a broader technology hardware ecosystem has attracted investors seeking exposure to AI infrastructure. According to Bloomberg data reported by Yahoo Finance, Taiwan's Taiex had gained 70% in 2026, outperforming KOSPI by approximately 23 percentage points in the previous quarter.

UBS Global Wealth Management said it preferred Taiwanese equities for tactical AI exposure, citing the diversity of the market's technology hardware industry and substantial capital spending by major technology companies.

Domestic investor participation has weakened as well. Outstanding margin loans fell to approximately 33 trillion won from a June peak of 38.6 trillion won, while brokerage deposits declined to around 100 trillion won from nearly 140 trillion won, according to Bloomberg data cited by Yahoo Finance.

Corporate share repurchases, another source of market support, are also approaching a turning point. Samsung Electronics and SK hynix are nearing completion of buyback programs totaling 55 trillion won, equivalent to approximately $41 billion, according to the same report.

Upcoming semiconductor earnings announcements could influence market sentiment. ASML and Taiwan Semiconductor Manufacturing Co. are scheduled to report results during the week of October 12, followed by SK hynix on October 27 and Samsung Electronics' earnings conference call on October 29, according to the Korea Times.