Authorities in South Korea and Taiwan intervened today to prop up their tech-heavy stock markets after the unwinding AI trade sent shares sharply lower.
South Korea's finance minister said the government would temporarily loosen collateral rules for brokerage firms, aiming to prevent excessive forced selling, and might take other steps next week if volatility persists. He said South Korea's fundamentals remained strong. The Kospi has lost roughly $2.4 trillion in value since its June peak.
Already Seoul regulators have repeatedly suspended trading this year-including a 20-minute halt today-trying to tamp down volatility. Much of the market's value is concentrated in two chip makers, SK Hynix and Samsung Electronics, and many retail investors piled into single-stock leveraged exchange-traded funds after regulators loosened restrictions in May.
Authorities in Taiwan, where the benchmark Taiex index shed 12% this week, said the National Financial Stabilization Fund would deploy funds as needed to stabilize the market. The fund has about $15 billion at its disposal. Regulators said they would tighten short-selling restrictions next week and encourage companies to consider share buybacks to restore confidence.
Taiwan's market rides largely on Taiwan Semiconductor Manufacturing, the world's largest contract chip maker, which counts Nvidia among its top customers and has reaped a windfall from the AI boom. TSMC shares have fallen 17% in the past month.
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