South Korean shares log seventh straight weekly loss as AI, chip worries persist

South Korean shares slipped on Friday and recorded their seventh straight weekly loss, as investor worries over the AI trade and wild swings in chip stocks kept sentiment fragile.

The benchmark KOSPI index jumped almost 2% within the first few minutes of trading before reversing course to decline as much as 2.2% during the session, reflecting the ever-shifting and fragile sentiment towards AI-linked stocks. The index ended 0.6% lower at 6,258.77.

It declined more than 5% for the week to post its longest streak of weekly losses since December 2022.

South Korean equities have swung sharply in recent weeks due to record leveraged trading and foreign outflows.

The KOSPI has fallen 31% since its June 22 record close, though it remains about 48% higher for the year.

While the recent pullback and new curbs on debt-funded products have reduced volumes and eased sharp swings, the market remains vulnerable to shifting expectations around the AI trade.

“The Korean market is still searching for equilibrium after an extraordinary period of volatility,” said Jung In Yun, CEO at Fibonacci Asset Management Global in Singapore.

Dilin Wu, a research strategist at Pepperstone in Melbourne, said, “the floor needs two things: foreign buying turning consistently positive, and the Iran-Oman Hormuz framework actually translating into reopening.”

“Until both land, any price recovery is likely to stay capped, with violent daily swings in either direction. Being right on the fundamentals isn’t enough right now — position sizing matters more than direction.”

Foreigners sold shares worth 859.0 billion won ($605.96 million), extending year-to-date equity outflows to about $116 billion, according to exchange data.

Oil prices extended gains on mounting concerns over access to the Strait of Hormuz as Iran reviewed a preliminary bill that would bar US, Israeli and other “hostile” vessels from transiting the strait. On the KOSPI, leading AI memory chipmaker Samsung Electronics inched higher, while rival SK Hynix tumbled 4.9%, extending its weekly losses to 13% - the biggest since mid-July.

Hyundai Motor fell 1.1%, while sister automaker Kia Corp was up 1%.

Steelmaker POSCO Holdings climbed 3.8%, while drugmaker Samsung BioLogics rose 2.8%.

The won strengthened to 1,418.8 per dollar on the onshore settlement platform, putting it on course for a sixth consecutive week of gains.

A recent Reuters poll showed investor positioning on the won turning bullish for the first time in more than 10 months as the currency gains support from intervention and repatriation of proceeds from SK Hynix’s ADR launch in the United States.