As debate over an artificial intelligence (AI) bubble flared and uncertainty over interest rate cuts grew, Korea's stock market slumped. The KOSPI fell below the 4,000 mark for the first time in six sessions, and the KOSDAQ also closed down more than 2%.

On the afternoon of the 18th, the closing prices are displayed on the ticker in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. The KOSPI index closes at 3,953.62, down 135.63p (3.32%) from the previous trading day, and the KOSDAQ index ends at 878.70, down 23.97p (2.66%). /Courtesy of News1

The KOSPI closed at 3,953.62 on the 18th, down 135.63 points, or 3.32%, from the previous day. The break below the 4,000 level for the KOSPI came 11 sessions after on the 7th (3,953.76). The KOSDAQ also finished at 878.70, down 2.66% (23.97 points) from the previous day.

Both the main board and the KOSDAQ were dragged down by foreigners and institutions. Foreigners and institutions posted net sales of 548.6 billion won and 676.8 billion won, respectively, on the main board. Individual investors tried to defend the market with net purchases of 1.2419 trillion won, but it was not enough.

On the KOSDAQ, while individuals net bought 384.4 billion won, foreigners and institutions net sold 184.9 billion won and 118.6 billion won, respectively.

The market reacted sensitively to negative developments from the United States. In particular, ahead of Nvidia's earnings release, the AI bubble debate has persisted in U.S. markets. Concerns intensified on news that Silicon Valley's prominent venture investor Peter Thiel sold his entire Nvidia equity stake.

Uncertainty over the possibility of an interest rate cut by the U.S. Federal Reserve (Fed) also played a part. According to the Chicago Mercantile Exchange (CME) FedWatch, expectations for a hold in December have now become dominant at 57%.

Lee Jae-won, a researcher at Shinhan Investment & Securities, analyzed that "tension over Nvidia's earnings release and hawkish remarks by U.S. Federal Reserve Commissioners, coupled with a lack of catalysts for gains, erased the KOSPI's rise from the previous day."

Korea's semiconductor stocks were hit directly. Samsung Electronics fell more than 2%, and SK hynix plunged nearly 6%.

Sectors benefiting from AI data centers, such as nuclear power and power equipment, were also weak. Doosan Enerbility, Hyosung Heavy Industries, HD Hyundai Electric, and Taihan Cable & Solution also closed lower.

Lee Kyung-min, a researcher at Daishin Securities Co., said, "Expectations for rate cuts are cooling due to successive hawkish remarks by key Federal Reserve Commissioners," adding, "As the minutes of the October Federal Open Market Committee (FOMC) meeting are released on the 20th, and through the December end of quantitative tightening (QT, balance sheet reduction) and the FOMC's regular meeting, the stock market will pass an inflection point in monetary policy and liquidity uncertainty."

For now, attention appears to be on the 20th. That is because both Nvidia's earnings release and the FOMC minutes will be disclosed that day.

Researcher Lee Jae-won explained, "It is expected that the market direction will be largely set by whether concerns over rate cuts and concerns over AI overvaluation are resolved or become negatives."

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