South Korean Stocks Fall as Foreign Investors Retreat From AI-Fueled Rally

South Korea's benchmark KOSPI index fell 241.69 points, or 3.65%, to close at 6,384.24 on October 12, 2026, according to Korea Exchange data reported by UPI. It was the index's lowest close in more than two months and marked a fourth consecutive session of losses, with decliners outnumbering gainers 717 to 166.

A Fifth Day of Foreign Selling

Foreign investors sold a net 2.02 trillion won (roughly $1.5 billion) of KOSPI-listed shares on October 12, extending their selling streak to five consecutive trading days, according to South Korea's Financial News (fnnews.com) and UPI. Samsung Electronics fell 4.39% to 250,500 won and SK Hynix dropped 4.52% to 1,605,000 won, its fourth straight daily decline. On the secondary Kosdaq market, Alteogen fell 4.77%, EcoPro fell 8.38% and Jusung Engineering fell 5.61%, fnnews reported.

Analysts linked part of the sell-off to the unwinding of semiconductor-focused exchange-traded funds and to signs that Samsung Electronics and SK Hynix were close to completing planned treasury stock purchases, according to a Hana Securities analyst cited by UPI.

The decline also coincided with rising oil prices after a Houthi attack on Saudi Arabia's main airport added to Middle East tensions, UPI reported. West Texas Intermediate crude traded near $91 a barrel. Seoul Economic Daily reported that a dispute over OpenAI's reported revenue - $50 billion against market expectations of $68 billion to $70 billion - had already unsettled artificial-intelligence-related shares in U.S. trading before Asian markets opened that day.

A $131 Billion Exodus in 2026

The October slide extends a broader reversal. Foreign investors have withdrawn $131 billion from Korean equities so far in 2026, the largest outflow among major Asian markets, according to exchange data cited by Yahoo Finance. The KOSPI fell 22% in the second half of 2026 after leading global benchmarks in the first half, and trading turnover in the roughly $4.3 trillion equity market dropped 70% from its May peak, the same report said.

Retail participation has also cooled. Outstanding margin loans fell from 38.6 trillion won in June to 33 trillion won, while brokerage deposits dropped from nearly 140 trillion won to about 100 trillion won over the same period, Yahoo Finance reported.

Why the AI Trade Is Cooling

Samsung Electronics and SK Hynix together account for more than half of the KOSPI's weighting, and the two chipmakers have absorbed most of the recent foreign selling. Between September 1 and October 2, foreign investors sold 20.305 trillion won of KOSPI shares, with about 85% - 17.195 trillion won - concentrated in SK Hynix (12.009 trillion won) and Samsung Electronics (5.186 trillion won), Seoul Economic Daily reported. Foreign ownership of SK Hynix fell to 49.76%, its lowest level in more than three years, while foreign ownership of Samsung Electronics dropped to 46.41% by October 2.

The selling has continued even though both companies reported strong results: Samsung Electronics' quarterly operating profit rose nearly ninefold, according to Yahoo Finance, which said investors were nonetheless questioning how long current memory-chip demand, driven largely by AI infrastructure spending, can be sustained. Seoul Economic Daily reported that Kiwoom Securities analyst Han Ji-young said the intensity of foreign selling had weakened over time, and that the key open question was when foreign investors would return as net buyers once macro risks pass their peak.

Share buybacks totaling 55 trillion won ($41 billion) by Samsung Electronics and SK Hynix are nearing completion, removing a source of demand that had supported both stocks, Yahoo Finance reported.

Money Rotating to Taiwan

Some of the capital leaving Korea has moved to Taiwan, whose Taiex index gained about 70% in 2026 and outperformed the KOSPI by roughly 23 percentage points in the third quarter, according to Yahoo Finance.

The KOSPI reached a record closing high of 9,114.55 points on June 22, 2026, and an intraday record of 9,385.59 points three days earlier, according to Wikipedia, before the second-half reversal. The index tracks common shares listed on the Korea Exchange's main board and had more than 950 constituents as of January 2026, led by Samsung Electronics, SK Hynix, Samsung Biologics, LG Energy Solution and Hyundai Motor.

No official timeline exists for when foreign buying might resume. Seoul Economic Daily reported that selling pressure eased briefly in early October, with net foreign sales dropping to 190 billion won on October 2, before intensifying again in the days that followed.