Investing.com– South Korea’s index fell sharply on Monday, catching up with losses in its regional peers following a long weekend as local memory chip stocks remained on the backfoot.
The KOSPI reversed early gains and fell 4.3% to 6,520.66 points, remaining close to a three-month low and in a bear market entered earlier in July.
Samsung Electronics Co Ltd () and SK Hynix Inc () were the worst performers on the index, falling 4.1% and 3.5%, respectively. The two tracked losses in broader chipmaking stocks from last week, after blowout earnings from TSMC failed to stem a rout in the sector.
Markets sold chipmaking stocks wholesale in recent weeks, locking in profits in the high-flying sector amid rising questions over whether their stellar, artificial intelligence-fueled growth will be sustainable in the coming quarters.
Questions over stretched AI-fueled valuations and rising capital expenditures on the industry also spurred caution, as did growing uncertainty over U.S. interest rates.
KB Securities argued in a recent note that markets are increasingly valuing AI investments through the lens of funding costs, rather than their long-term growth prospects.
The brokerage noted that concerns over high funding costs had battered AI stocks earlier in the past year. But this time, a mix of heightened geopolitical uncertainty and fears of rising interest rates were adding to pressure on equity valuations.
But despite recent losses, the KOSPI remained the best-performing stock market in the world this year, with a 51% year-to-date increase.