Join the newsletter that everyone in finance secretly reads. 1M+ subscribers, 100% free.
Korea's stock market just notched its worst month in nearly two years, as foreign investors dumped chip and battery stocks and dragged the KOSPI down 4.4% in November.
What does this mean?
Korea's once-soaring chip stars just hit a speed bump. The KOSPI dropped 1.51% on Friday alone, with heavyweight chipmakers Samsung Electronics and SK Hynix sliding 2.9% and 2.57% as investors fretted that artificial intelligence (AI) leaders have simply become too expensive. That worry mirrors a broader global rethink on AI valuations, with Mirae Asset Securities analyst Seo Sang-young calling this a key moment for whether concerns about an "AI bubble" ease or intensify. Tech took the biggest hit: the electric and electronic index fell 2.85%, LG Energy Solution plunged 6.85%, and steel-to-battery giant POSCO Holdings dipped 1.12% - even as more individual stocks rose than fell, with 595 gainers versus 282 decliners out of 928. The real pressure came from abroad, as foreign investors sold 2.04 trillion won of Korean shares on Friday and 14 trillion won (about $9.5 billion) over the month, while the won weakened to around 1,471 per dollar and local bonds rallied, pushing three-year yields toward 3.00% and ten-year yields to 3.35% as investors shifted toward safer assets.
Korea's equity market is highly exposed to global capital flows, and November's 14 trillion won foreign sell-off shows how fast sentiment can flip when a hot theme like AI starts to look overpriced. Chipmakers and battery firms have been core plays for investors riding trends in data centers, electric vehicles, and energy storage, so a pullback there can ripple through tech-heavy markets across Asia. The fact that more stocks rose than fell on a weak index day suggests the damage is concentrated in crowded, valuation-stretched names rather than the whole market. Meanwhile, falling three-year and ten-year government bond yields point to rising demand for safety and a view that domestic growth and inflation could cool from here. If foreign selling keeps up, equity valuations may need to reset further before global funds feel comfortable piling back into Korea's flagship sectors.
The bigger picture: AI hype is facing a valuation test.
Korea often acts as a proxy for global tech cycles, with Samsung and SK Hynix supplying the same AI and cloud giants that have powered US market gains. So when worries about an AI "bubble" flare, stock moves in Seoul can offer an early read on how far investors are still willing to stretch valuations for future growth. The combination of a weaker won and stronger local government bonds fits a classic risk-off pattern, with overseas investors pulling money from equities while domestic cash leans into safer fixed income. If that mood spreads, it could cool the red-hot momentum behind AI-linked investments worldwide and push policymakers and companies to show that profits can catch up with lofty expectations. Over time, that might separate durable AI leaders with real earnings power from firms mainly surfing the hype.