Sharp losses have eased for now, but KOSPI remains weak as foreign investors sell 2.5 trillion won [fn afternoon market wrap]

[Financial News] South Korea’s stock market, shaken by uncertainty over the U.S. midterm election results and concerns about regulation of the artificial intelligence (AI) industry, recouped some of its losses in the afternoon.
The market opened more than 2% higher, buoyed by a rebound in U.S. semiconductor stocks and strong results from AMD, but turned lower as the possibility of the Democrats expanding their influence in Congress came into focus.
However, as vote counting progressed and the election outcome began to take shape, the market recovered somewhat from its intraday lows. Investors are focused on whether easing political uncertainty could lead to a rebound in semiconductor stocks.
As of 2 p.m. on the 4th, the KOSPI stood at 5,560.47, down 88.32 points (1.56%) from the previous trading day, according to the Korea Exchange (KRX).
The KOSPI opened up 2.4% but turned lower as vote counting in the U.S. midterm elections gathered pace. After falling to 5,535.51 at 1:51 p.m., the index pared some of its losses. The KOSDAQ was also down 4.10 points (0.58%) at 700.29, barely holding above the 700 mark.
Selling pressure remains high. Foreign investors are net sellers of 2.5055 trillion won worth of shares on the KOSPI market. Retail investors and institutions have bought 1.8539 trillion won and 274.2 billion won worth of shares, respectively, absorbing the selling, but their purchases have not been enough to offset foreign investors’ selling pressure. On the KOSDAQ, foreign investors bought a net 23.9 billion won and retail investors 2.9 billion won, while institutions sold a net 12.7 billion won.
Large-cap stocks were mostly lower. Samsung Electronics was trading at 214,000 won, down 5,500 won (2.51%) from the previous trading day. SK hynix stood at 1,357,000 won, down 41,000 won (2.93%).
SK Square also fell 3.23%, while major stocks including Samsung SDI and Celltrion were lower. The early gains led by semiconductor stocks were undone by concerns related to the midterm elections.
Easing uncertainty over the U.S. midterm election results is seen as one reason losses narrowed somewhat in the afternoon. As vote counting made the possibility of the Democrats expanding their influence in Congress more concrete, market caution among investors awaiting the outcome appears to have eased somewhat.
However, with control of Congress by the Democrats and the direction of future policy not yet fully settled, it is too early to view this as a full-fledged recovery in risk appetite.
Yuanta Securities said it was difficult to regard the election results themselves as a new negative catalyst. Lee Jae-won, a researcher at Yuanta Securities, noted, "The possibility of the Democrats retaking both chambers was a scenario that had already been priced in at a probability of at least 60% before the election."
Rather, the Democrats’ efforts to constrain further fiscal expansion could put the brakes on the Trump administration’s tax cuts and increased fiscal spending, limiting additional Treasury bond issuance and pressure for long-term interest rates to rise, the firm said.
Concerns about regulation of AI data centers, which are weighing on the market, remain a factor. As speculation grows that the Democrats’ increased influence in Congress and the results of key gubernatorial elections could lead to tighter limits on data-center permits or higher costs for the power grid, concerns have emerged that AI infrastructure investment could be delayed and memory demand could weaken.
The researcher said tighter regulation would not immediately bring AI investment to a halt. He stressed, "It is necessary to distinguish between delays in starting construction due to tighter regulation and actual cancellations of orders for servers and memory."
He also cited the fact that suspending permits for new data centers in Texas is a measure already implemented by a Republican governor, and that the burden of electricity costs on local residents is also a bipartisan issue. Given the president’s veto power and the strategic importance of the U.S.-China competition for AI dominance, it would be difficult to halt AI investment itself, he said.
He also cautioned against excessive concern about the memory market outlook. The researcher said, "There is insufficient basis to conclude that memory ASPs will fall based solely on delays in the execution of some projects."
Even if some data-center projects are delayed from 2027 to 2028, the result could be limited to slower memory price growth if supply shortages persist, he said. He explained that a substantial deterioration in supply and demand and the possibility of price declines could be assessed only if widespread order cancellations, reduced purchase commitments, and rising customer inventories are confirmed.
The factors that will determine the stock market’s direction going forward are changes in interest rates and foreign investor flows after election uncertainty clears. However, as recent rate declines have also reflected a preference for safe-haven assets, it will be important to see whether credit spreads stabilize as well.

[email protected] Kang Jung-mo Reporter