DeepSeek shock pushes KOSPI down to 2510 level... Foreigners sell off 1 trillion won

After the long holiday, the domestic stock market reopened and closed lower on the 31st. Reflecting the impact of "DeepSeek Shock," SK Hynix, a memory chip manufacturer for artificial intelligence (AI), plummeted. On the other hand, Naver and Kakao rose on expectations of expanded AI services.

According to the Korea Exchange on the 31st, the KOSPI index closed at 2,517.37, down 19.43 points (0.77%) from the previous trading day. The KOSDAQ index ended the session at 728.29, down 0.45 points (0.06%). In the securities market, foreigners sold a net 1.2343 trillion KRW worth of stocks. Individuals and institutions bought a net 963.2 billion KRW and 196.3 billion KRW, respectively. In the KOSDAQ market, individuals alone sold a net 29.2 billion KRW, while foreigners and institutions bought a net 30.5 billion KRW and 3.7 billion KRW, respectively.

The KOSPI index started the trading day around 2,500 with a weak tone on the first day of trading after the Lunar New Year holiday on the 31st. The index and other figures are displayed on the index status board in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. Photo by Yoon Dong-joo

During the holiday, Chinese AI startup DeepSeek introduced a large language model (LLM) that shocked the global market, and its ripple effects were reflected in the domestic stock market. DeepSeek's generative AI rivals the performance of the industry leader, the U.S. OpenAI's ChatGPT, while being much cheaper to develop, shaking the market.

If demand for NVIDIA's AI graphics processing units (GPUs) decreases, it would be negative news for Korean companies that make up the high-bandwidth memory (HBM) value chain used in these GPUs.

In particular, SK Hynix closed down 9.86% that day, marking its largest drop since a 8.02% decline on September 4 last year. Samsung Electronics fell 2.42%. On the KOSDAQ market, semiconductor equipment maker HPSP's stock price dropped sharply by 7.56%.

There were also stocks that saw increased expectations due to DeepSeek's emergence. Naver closed up 6.13% that day. Until now, Naver had been trailing behind U.S. big tech companies in the LLM market, which requires massive development costs. If DeepSeek's innovation reduces development costs, it could create opportunities for Naver. Other AI service-related stocks such as Kakao (7.27%) and Douzone Bizon (4.25%) also rose together.

Next week, major companies will release their earnings reports. On the 3rd: LG Chem and POSCO Holdings; on the 4th: Hana Financial Group and Hanmi Pharmaceutical; on the 5th: KB Financial Group, Woori Financial Group, KakaoBank, and SK Telecom; on the 6th: HD Hyundai Heavy Industries and SK Innovation; and on the 7th: Naver and Hanwha Systems.

Meanwhile, the won-dollar exchange rate rose 21.4 won to 1,452.7 won compared to the closing price at 3:30 p.m. the previous day. The U.S. Federal Reserve (Fed) maintained the policy interest rate at 4.25?4.5% at the Federal Open Market Committee (FOMC) regular meeting on the 29th (local time). In contrast, the European Central Bank (ECB) cut its policy rate from 3.15% to 2.9%, marking the fourth consecutive rate cut since September last year. As a result, analyses suggest that the dollar's strength against major currencies is expanding.