SOUTH Korean shares slid more than 5% on Monday to kick off August on a rocky note as investors sold off heavyweight chipmakers following a record rally the previous session.
The benchmark KOSPI index declined as much as 5.5% to 6,231.66 points as of 0420 GMT after soaring by a record 18% on Friday. Despite that, the gauge shed 22.2% in July to clock its steepest monthly drop since October 2008.
Equities in Seoul have been whiplashed by a rapid unwinding of leveraged bets tied to heavyweight chipmakers and concerns around the durability of capital expenditure by AI hyperscalers.
Friday's record rally gave way to fresh selling on Monday, underscoring the fragile sentiment around AI investment and the outsized influence of leveraged retail bets on the heavyweight chipmakers.
Samsung Electronics and rival SK Hynix , two major chipmakers that account for more than half of the KOSPI index, shed 8.4% and 7.6%, respectively.
"Today's pullback is best read as a positioning unwind rather than a change in the fundamental picture. Korean equities have become a high-beta proxy for global AI sentiment," Billy Leung, investment strategist at Global X ETFs Australia, said.
"The near-term path will likely stay volatile given how much leverage remains in the system, but the demand backdrop underneath the volatility is still strong."
The scale of the KOSPI's volatility is evident in this year's sharp swings: 32 of the 42 daily moves of more than 5% over the past decade have occurred this year, as per William Bratton, Head of Cash Equity Research, APAC, BNP Paribas. Regulators have introduced measures to cap the impact of highly volatile financial products. However, investors remain skeptical about whether these curbs will be sufficient to weather the current market downturn.
"Our discussions with investors suggest a high degree of frustration that the underlying fundamental story is being overwhelmed by the current level of market volatility," Bratton wrote. Meanwhile, data showed July exports beat market expectations on the back of a massive 179% surge in semiconductor shipments, with a purchasing managers survey by S&P Global showing factory activity expanding at a stronger pace in July on export demand.
Elsewhere in the KOSPI, Hyundai Motor and sister automaker Kia Corp were up 1.42% and down 2.43%, respectively.
Foreigners were net sellers of shares worth 2.16 trillion won ($1.51 billion) on Monday, after offloading a total of 9.86 trillion won in July, as per exchange data. The won firmed to 1,429.40 per U.S. dollar, but remained below the 1,418 level it touched last Thursday after foreign exchange authorities conducted a rare dollar-selling intervention, as per a market source.
($1 = 1,430.1000 won) - Reuters
