Seoul's KOSPI index drops below 5,000 as AI-linked shares sell off

Shares on Seoul's main stock index tumbled below 5,000 on Friday as investors feared slower construction of artificial intelligence data centers after the US midterm elections, South Korea's national news agency Yonhap reported.

The Korea Composite Stock Price Index fell more than 8 percent, triggering a 20-minute trading halt, the first such halt in 16 trading sessions.

Shares of Samsung Electronics and SK hynix, which together make up nearly half the market, dropped more than 10 percent in morning trading.

Democrats won majorities in both the Senate and the House, and analysts said Trump's political power could weaken over the final two years of his term.

Investors are now watching whether a Democrat-led Congress will slow the building of AI data centers, a key driver of tech spending.

Democrats also won the governor's race in Texas, a major state for AI data centers, while the tech-heavy Nasdaq slid more than 5 percent overnight.

Han Ji-young, an analyst at Kiwoom Securities, said volatility in the local market is likely to continue after the sharp drop.

The Korea Exchange said the KOSPI 200 volatility index rose to 64.74 on Friday, its highest level in three months.

Lee Kyung-min, an analyst at Daishin Securities, said the Democratic election win may delay AI data center projects, but a full halt to such construction is unlikely.

In a research note, Daishin Securities said the market's reaction to the AI-driven selloff was excessive.

Finance Minister Lee Hyoung-il told a meeting with relevant ministers earlier Friday that the government would prepare measures to keep stock markets from overreacting to the US tech selloff.

Lee said South Korea will closely watch external risks but that the country's economic fundamentals remain solid.

He also pointed to forecasts from some experts that global investment in AI will continue to grow.