SEOUL: South Korea's Kospi collapsed 10 per cent Tuesday (Jun 23) in an Asian stock market rout that followed a tech-led sell-off on Wall Street with investors again questioning a long-running AI-fuelled boom.The rout followed a sharp drop on Wall Street, where the Nasdaq sank more than 1 per cent as market giants Amazon, Nvidia and Microsoft were sharply down.Tech firms - the main driver of a surge across world markets as investors pile into all things AI - took a painful hit in Asia.The benchmark Kospi closed down 910.71 points, its biggest daily plunge since Mar 4, at 8,203.84 points.Market bellwether Samsung Electronics Co and peer SK Hynix shed more than 12 per cent each, wiping out billions in market value and triggering an automatic 20-minute bourse-wide trading halt in the afternoon.The Kospi has become increasingly dominated by the two chipmakers that now make up more than half of the market value, as they propelled the index past the historic 9,100-point level for the first time on Monday.
In Japan, the Nikkei 225 was down 3.55 per cent at closing, falling to 69,788.38.Tuesday's pullback underscores the intensifying volatility of a market that critics worry has become dangerously overstretched, says Alexander Redman, chief equity strategist, CLSA."Volatility has blown out. (This kind of volatility) cannot be explained without heavy retail engagement," said Redman."What worries me is that retailers are in the driving seat, because they use a lot of margin, though the ratio to market cap is small. What is more worrying is that regulators have now allowed leveraged single security ETFs, pouring fuel onto the fire."On Monday, the head of South Korea's market watchdog Lee Chan-jin said the government had been too hasty in approving leveraged funds tied to some of the country's best-known chip stocks, which were introduced last month and have contributed to heightened volatility.Regulators recently cautioned retail investors against the use of leverage on the Kospi, as margin debt, or borrowing to buy stocks, rose to a record high in June.The Kospi has risen 94.67 per cent so far this year while the won has weakened 6.5 per cent against the dollar.In money and debt markets, September futures on three-year treasury bonds gained 0.14 points to 103.01.The most liquid three-year Korean treasury bond yield fell by 3.1 basis points to 3.772 per cent, while the benchmark 10-year yield fell by 1.8 basis points to 4.179 per cent.
