Global Market: South Korean shares slip nearly 2% as AI spending worries overshadow softer inflation

South Korean equities reversed sharp early gains to trade nearly 2% lower on Tuesday, as renewed concerns over artificial intelligence-related spending and continued selling in heavyweight chipmakers outweighed relief from weaker-than-expected inflation data, Reuters reported.

The benchmark KOSPI was down 119.25 points, or 1.9%, at 6,138.20 as of 0043 GMT, after climbing as much as 2.1% earlier in the session. The decline followed a drop of more than 5% in the previous trading session.

According to Reuters, Seoul's stock market has come under pressure amid a rapid unwinding of leveraged positions linked to major semiconductor stocks. Investors have also grown increasingly concerned that aggressive capital spending on AI infrastructure by large data centre operators may prove unsustainable.


Economic data released on Tuesday showed South Korea's consumer inflation eased to 2.8% in July from 3.2% in June, coming in below market expectations as lower oil prices helped moderate price pressures.

While the softer inflation reading provided some support to sentiment, it was insufficient to offset the broader weakness in equities.

The data comes after the Bank of Korea raised interest rates last month and signalled the possibility of further policy tightening, reflecting the central bank's continued focus on inflation risks.

Among heavyweight stocks, Samsung Electronics dropped 3.76%, while SK Hynix fell 3.70%. Automakers also traded lower, with Hyundai Motor declining 3.69% and Kia Corp losing 1.85%.

Market breadth remained positive despite the benchmark's decline, with 666 of the 910 traded stocks advancing and 211 falling.

Foreign investors were net buyers of shares worth 249.4 billion won ($174.93 million), according to Reuters.

In the currency market, the South Korean won traded at 1,430.7 per U.S. dollar on the onshore settlement platform, down 0.08% from the previous close of 1,429.5. In offshore markets, the won strengthened 0.3% to 1,424.9 per dollar, while its one-month non-deliverable forward contract was quoted at 1,424.6.

In the bond market, September futures on three-year Korean treasury bonds rose 0.08 point to 103.38. The yield on the most liquid three-year government bond fell 2.3 basis points to 3.719%, while the benchmark 10-year bond yield declined 2.7 basis points to 4.226%, Reuters reported.

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