South Korea stocks plunge below 5,000 mark as tech sell-off triggers trading halt

South Korea's primary stock index experienced a dramatic drop on Friday, sliding under the 5,000 threshold following significant declines across the technology sector on Wall Street. Market turbulence intensified following U.S. midterm election results, which raised investor worries concerning future infrastructure spending for artificial intelligence.

The benchmark Korea Composite Stock Price Index dropped by more than 8 percent, triggering an automatic 20-minute suspension of trading. The circuit breaker mechanism had not been implemented on the exchange for 16 trading sessions. Heavyweight chipmakers led the downturn, with shares of Samsung Electronics and SK hynix sliding over 10 percent during morning hours. Together, the two semiconductor manufacturers represent nearly half of the index's total market weighting.

Market sentiment soured globally after Democrats secured majorities in both chambers of the U.S. Congress, alongside winning the governor's seat in Texas, a pivotal region for tech facility expansion. The shifts are expected to diminish the legislative influence of U.S. President Donald Trump during his remaining two years in office, prompting concerns that federal policy might curtail or delay artificial intelligence data center developments. The Nasdaq composite had already dropped by more than 5 percent overnight before the Asian trading session opened.

Market fluctuations prompted South Korea's benchmark volatility indicator, the VKOSPI, to surge to 64.74, marking its highest reading in three months. Kiwoom Securities analyst Han Ji-young cautioned that heightened instability is likely to persist across the domestic bourse following the severe contraction.

Despite the steep losses, some industry specialists suggested the market reaction was overstated. In a research briefing, Daishin Securities analyst Lee Kyung-min observed that while the new political landscape could cause delays in data center schedules, an outright termination of infrastructure projects remains improbable.

In response to the market turmoil, South Korean authorities moved to reassure investors. Finance Minister Lee Hyoung-il pledged during a ministerial meeting that the administration would prepare proactive steps to curb extreme reactions linked to foreign equity movements. While acknowledging external headwinds, Lee emphasized that domestic economic foundations remain sturdy and pointed to broader projections indicating that capital spending on artificial intelligence will persist globally.