The Kospi index, South Korea's benchmark stock market, experienced a significant drop of 6% on Wednesday, closing at 5,663.24. This decline followed an earlier dip of more than 8% and marked its lowest level since early April, despite having recently surpassed the 9,000 milestone. The sharp downturn was largely attributed to renewed doubts among investors regarding the substantial investments in artificial intelligence and the potential returns from those expenditures. This skepticism particularly impacted South Korea's market due to the dominance of its two largest tech companies, SK Hynix and Samsung Electronics.
SK Hynix shares sank 9.4% to 9.6% in Seoul, after initially falling by 12.6%. This occurred despite the company reporting record-high revenue and profit for the quarter, boosted by strong AI demand. However, its 257% revenue growth, while substantial, did not meet analysts' expectations, and its operating profits of 60.5 trillion won ($41.2 billion) fell short of forecasts. Samsung Electronics also saw its shares drop by 4.8% to 8%, contributing significantly to the overall market decline.
The market volatility was not confined to South Korea, as other Asian markets also experienced mixed results. Tokyo's Nikkei 225 declined by 1.8% to 61,038.63, later settling at 61,434.19 with a 1.5% loss, with chipmaking equipment suppliers like Tokyo Electron plunging 10.6% and Lasertec Corp. falling 8.3%. Taiwan's Taiex shed 3.6% to 3.8%, and the Shanghai Composite index slid 0.5% to 3,793.11. Conversely, Hong Kong's Hang Seng index gained 1.7% to 25,738.42, and Australia's S&P/ASX 200 rose 1% to 9,036.90.
Adding to the market's concerns were surging oil prices, with Brent crude leaping 7.3% to settle at $87.58 per barrel, and benchmark U.S. crude increasing 4.2% to $82.58 per barrel. This increase was partly attributed to escalating military strikes between the United States and Iran in the Middle East. Additionally, a recent interest rate hike by the Bank of Korea, the first since 2023, also weighed on South Korean stocks, alongside broader worries that central banks might need to raise rates further to curb inflation spurred by expensive oil. On Wall Street, the S&P 500 fell 112.63 points to 7,316.15, the Dow Jones Industrial Average dropped 1,153.18 to 51,594.14, and the Nasdaq composite sank 433.97 to 24,442, with Nvidia being a significant drag, falling 3.6%.
