The panic surrounding technology stocks has spread to the Asia-Pacific markets. Influenced by the sharp overnight decline in U.S. tech shares, Asia-Pacific stock markets collectively fell on February 5. The South Korean Kospi index closed down by over 200 points, a drop of nearly 4%. Japan's Nikkei 225 index ended the day 0.88% lower. Notably, foreign investors recorded a net sell-off of 4.99 trillion won in Kospi index constituent stocks on that day, setting a new single-day record. Institutional investors also net sold 2.07 trillion won worth of Kospi index components. Nick Twidale, Chief Market Analyst at AT Global Markets, commented that Asian markets are feeling the impact of Wall Street's overnight sell-off. He stated it is uncertain whether tech stocks have peaked, suggesting there is still room for further market correction. He described the activity as a traditional shift from selling technology stocks to moving into defensive sectors.
South Korean stocks experienced a significant decline of over 200 points. On February 5, the South Korean stock market opened lower and continued to fall. By the close, the Kospi index had dropped 207.53 points to 5,163.57, a substantial decline of 3.86%. AI chip-related stocks led the losses, with SK Hynix falling 6.44% and Samsung Electronics down 5.80%. These two chip giants were the biggest drags on the Kospi index. On the same day, foreign investors net sold a record 4.99 trillion won in Kospi index constituents. Japanese stocks also fell. The Nikkei 225 index closed down 0.88% at 53,818 points. Among heavyweight components, SoftBank Group dropped 7%, Advantest fell 4.81%, Recruit Holdings declined 4.68%, while Keyence and Nintendo both fell over 2%. Tokyo Electron decreased by nearly 2%. Conversely, Mitsubishi Corp. rose 6.64% and Chugai Pharmaceutical gained 4.86%.
The primary trigger for the decline in Asian tech stocks was the heavy sell-off in U.S. technology shares overnight. In recent trading sessions, investors have been shifting funds from tech giants to defensive stocks like Walmart, driven by concerns that artificial intelligence could impact employment. A recent sell-off triggered by a new legal tool from Anthropic's Claude large language model has led to software stocks losing nearly a trillion dollars in market value. This downturn is not fueled by bubble fears but rather by concerns that AI is poised to disrupt the business models of numerous companies—a scenario long predicted by doomsayers. Michael O'Rourke, Chief Market Strategist at Jonestrading, remarked, "I don't think this is an overreaction. For two years, we've been saying AI will change the world, that it's a generational technology. And in recent weeks, we've started to see signs of this materializing." "Today it might be legal tech, tomorrow it could be sales, marketing, or finance," added Jackson Ader, an analyst at KeyBanc.
Beyond investor anxiety, even companies previously seen as major beneficiaries of the AI boom are showing weakness. Gil Luria, Managing Director at DA Davidson, noted, "It started with selling software stocks, but now it's a sell-off across the board. This can become self-perpetuating—when prices fall enough, it creates negative momentum, which in turn prompts more selling."
South Korea Exchange CEO's Latest Statement The Chief Executive Officer of the Korea Exchange (KRX), Jeong Eun-bo, stated that the country's benchmark stock index has the potential to surpass the 6,000-point mark. He pledged efforts to develop the stock market, including extending trading hours to operate 24 hours a day. Speaking at the exchange's first press conference of the year, Jeong said, "Compared to other global markets, I believe our market has the potential to reach a level of at least 6,000 points. I am confident there will be no major issues in achieving this goal," referring to the benchmark Korea Composite Stock Price Index (Kospi). To help enhance the country's capital markets, the KRX plans to advance a series of initiatives. The first step will be introducing pre-market and post-market trading sessions in June. According to Jeong, the exchange will gradually move towards 24-hour trading on weekdays, aligning with practices at other global exchanges. Jeong explained, "There are only two ways we can create more liquidity: first, by enabling more local market participants to invest in the local market through effective financing methods, and second, by finding ways to attract foreign investor capital." He stated that progressively extending trading hours is necessary to attract liquidity from overseas. Additionally, leveraged exchange-traded funds (ETFs) and other investment products, such as weekly options, will be introduced. Jeong also mentioned that work will proceed on getting South Korean stocks included in MSCI indices, which includes implementing requirements for English-language regulatory filings ahead of schedule for companies listed on the Kospi.
The previous day, on Wednesday, February 4, the South Korean stock market had once again hit a record high, with the Kospi index surpassing the significant 5,300-point level for the first time. At the close that day, the Kospi index was up 1.57% at 5,371.1 points. Institutional investors were net buyers, purchasing 1.8 trillion won worth of stocks, while foreign and individual investors were net sellers, offloading 940 billion won and 1 trillion won, respectively.
