Key Takeaways
- • The KOSPI fell below 5,000 intraday and closed at 5,059.69, down 6.02 percent from the prior session, triggering a circuit breaker as foreign investors led heavy net selling.
- • Selling was driven by concerns over tighter U.S. regulation of AI data centres after the Democratic Party took control of Congress, and by a global slump in tech stocks, with semiconductor and AI-related shares hit hardest.
- • The Financial Services Commission (FSC) will exempt securities firms for three months from the 140 percent collateral ratio requirement on credit loans, starting on the 9th, in response to market volatility.
- • The FSC launched a task force to review lifting network separation rules and plans an AI-based security overhaul by Q1 next year, after a series of hacking incidents including a leak of 35,255 employee records at Mirae Asset Securities.
- • Securities firms' forecasts for next year's KOSPI range from 5,000 to 10,000, with U.S. inflation data and AI company earnings cited as key short-term drivers.
Summary
South Korean stocks experienced a steep correction driven by concerns over regulation of the artificial intelligence industry following the U.S. midterm elections, according to DigitalToday. As the U.S. Democratic Party gained control of Congress, the prospect of tighter regulation of AI data centres came into focus, and selling spread through semiconductor and AI-related shares. The KOSPI broke below 5,000 intraday last week, triggering a circuit breaker, and closed at 5,059.69, down 6.02 percent. Heavy net selling by foreigners led the decline, and the market's high dependence on semiconductors and its volatility were also cited as burdens.
Brokerages say it is too early to characterise the plunge as a structural collapse of the AI industry and that a rebound remains possible. They caution, however, that investors need to monitor foreign selling, U.S. AI regulation and the interest rate trend. The government responded by exempting securities firms for three months, from the 9th, from the obligation to maintain a 140 percent collateral ratio on credit loans. Securities firms' forecasts for next year's KOSPI range from 5,000 to 10,000.
Financial authorities also advanced sanctions and reform measures. The Financial Services Commission finalised penalties totalling 371.2 billion won and fines of 3.39 billion won against seven banks and six securities firms over mis-selling of equity-linked securities tied to Hong Kong's H Index, roughly two years and eight months after the matter arose. A bill to extend a special account for savings bank restructuring by one year is pending in the National Assembly before its expiry at year-end; if it fails, the deficit in savings banks' proprietary accounts could widen to as much as 350 billion won. The commission is also pushing a plan to supply 4.5 trillion won in low-interest loans over three years, funded by a 300 billion won special contribution from banks, for small and medium-sized firms in regional areas.
Security reforms are accelerating in response to hacking incidents across the financial sector. The FSC is launching a task force to review full lifting of network separation regulations and will conduct a full inspection by year-end of external contact points and internal control systems at about 580 financial companies. Financial Supervisory Service Governor Chan-jin Lee instructed firms to strengthen accountability for security management. At Mirae Asset Group, cyberattacks hit its life insurance and asset management units and then its securities affiliate; account numbers of about 3,800 customers and personal information of 35,255 employees were confirmed leaked at Mirae Asset Securities. In digital assets, a major hacking incident at Binance and repeated domestic exchange data leaks prompted Gopax to fully suspend deposits, withdrawals and trading.
AI adoption across finance is also accelerating. KakaoBank warned at a forum that banks face a survival crisis if they fail to respond to AI and stablecoins, while Woori Bank plans to apply AI to overseas remittance screening. Abroad, Revolut reportedly cut coding-related costs by about 90 percent after moving some external AI models in-house, and Forrester forecasts that one in three banks will declare an AI transition next year. Risks are also emerging: a U.S. survey found 42 percent of customers using AI during professional financial advice follow it without separate verification, and JPMorgan Chase and Bank of America are restricting external AI access to accounts following unauthorised trading by AI agents.
Brokerages say it is too early to characterise the plunge as a structural collapse of the AI industry and that a rebound remains possible. They caution, however, that investors need to monitor foreign selling, U.S. AI regulation and the interest rate trend. The government responded by exempting securities firms for three months, from the 9th, from the obligation to maintain a 140 percent collateral ratio on credit loans. Securities firms' forecasts for next year's KOSPI range from 5,000 to 10,000.
Financial authorities also advanced sanctions and reform measures. The Financial Services Commission finalised penalties totalling 371.2 billion won and fines of 3.39 billion won against seven banks and six securities firms over mis-selling of equity-linked securities tied to Hong Kong's H Index, roughly two years and eight months after the matter arose. A bill to extend a special account for savings bank restructuring by one year is pending in the National Assembly before its expiry at year-end; if it fails, the deficit in savings banks' proprietary accounts could widen to as much as 350 billion won. The commission is also pushing a plan to supply 4.5 trillion won in low-interest loans over three years, funded by a 300 billion won special contribution from banks, for small and medium-sized firms in regional areas.
Security reforms are accelerating in response to hacking incidents across the financial sector. The FSC is launching a task force to review full lifting of network separation regulations and will conduct a full inspection by year-end of external contact points and internal control systems at about 580 financial companies. Financial Supervisory Service Governor Chan-jin Lee instructed firms to strengthen accountability for security management. At Mirae Asset Group, cyberattacks hit its life insurance and asset management units and then its securities affiliate; account numbers of about 3,800 customers and personal information of 35,255 employees were confirmed leaked at Mirae Asset Securities. In digital assets, a major hacking incident at Binance and repeated domestic exchange data leaks prompted Gopax to fully suspend deposits, withdrawals and trading.
AI adoption across finance is also accelerating. KakaoBank warned at a forum that banks face a survival crisis if they fail to respond to AI and stablecoins, while Woori Bank plans to apply AI to overseas remittance screening. Abroad, Revolut reportedly cut coding-related costs by about 90 percent after moving some external AI models in-house, and Forrester forecasts that one in three banks will declare an AI transition next year. Risks are also emerging: a U.S. survey found 42 percent of customers using AI during professional financial advice follow it without separate verification, and JPMorgan Chase and Bank of America are restricting external AI access to accounts following unauthorised trading by AI agents.
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