Market Crash: Asian markets were so gripped by panic today that the Korean Kospi index fell by 10%. This is being attributed to fears of lower profits amid increased corporate spending on AI.
Market Crash: Heavy fall in Asian markets
Asian Market Crash: The South Korean stock market is experiencing a sharp decline today. This is the result of a massive sell-off in shares of chipmakers globally. Despite easing tensions between the US and Iran and falling crude oil prices, the crisis in the tech sector caused the South Korean market to plummet today.
The benchmark Kospi plunged 690.11 points, or 10.22%, to 6,065.64. Investors were spooked when the index fell sharply immediately after market opening. To prevent panic selling, the South Korean stock market had to implement a "sidecar" trading restriction, halting trading for a few minutes.
What are investors afraid of?
In the US stock market, major tech companies are increasing spending on artificial intelligence (AI), while investors remain concerned about declining profits. This is why semiconductor company shares fell sharply last night in the US stock market, and the impact was felt in Korean markets today.
Samsung and SK Hynix see historic declines
Samsung and SK Hynix suffered the most losses in the massive sell-off in South Korea's benchmark index, the Kospi, as investors booked profits. Samsung shares fell 10% today, while SK Hynix shares also recorded a massive 12.4% decline. The collapse of these two chip giants, which account for more than half of South Korea's economy and the Kospi index, dragged the entire index down.
Competition from Chinese companies is also a reason
Chinese chipmakers are gaining strength in the global semiconductor market. Furthermore, Chinese companies are adopting aggressive strategies to sell chips at low prices, threatening the profit margins of South Korean companies.
Recently, China's largest chip manufacturer, Changxin Memory Technologies (CXMT), made a spectacular entry into the market. Its shares surged nearly 500% upon its listing yesterday, July 27th. Meanwhile, reports emerged that a Chinese state-funded company has begun manufacturing immersion DUV lithography equipment, an advanced and complex technology for manufacturing semiconductor chips.
