Korea Halts Trading, Japan Enters a Bear Market as Asia's AI Rout Deepens

Asia's AI sell-off turned disorderly on Friday as South Korea halted trading and its benchmark fell 6%, while Japan's Nikkei closed in a bear market, more than 20% below its June record.

South Korea's KOSPI closed at 5,059.69, down 324.11 points, or 6.02%. It was the index's lowest close since March 31, according to Korea Exchange figures reported by the Seoul Economic Daily and MoneyToday.

The fall followed Thursday's 5.28% drop, a two-session decline of 10.98% (TickerGrove calculation). The KOSPI fell 11.7% for the week.

A halt in Seoul, then an emergency meeting

The KOSPI fell more than 8% within minutes of the open. At 9:03 a.m. Seoul time, the Korea Exchange triggered a Stage 1 circuit breaker — a 20-minute halt that fires when the index holds at least 8% below the prior close for a minute.

It was the 11th such halt this year. The index fell as low as 4,911.28, down 8.78%, trading below 5,000 for the first time since February 6.

Chipmakers led the decline. SK Hynix closed down 10.44% at 1,132,000 won, and Samsung Electronics fell 6.35% to 188,700 won.

Foreign investors net sold about 2.77 trillion won of Korean shares. Domestic institutions net bought about 1.70 trillion won, which cushioned the fall without stopping it.

Seoul's top financial officials met in emergency session late in the morning. Deputy Prime Minister and Finance Minister Lee Hyoung-il chaired the meeting, joined by the Financial Services Commission and Financial Supervisory Service chiefs and a Bank of Korea deputy governor.

The officials agreed to waive, for three months, the rule requiring brokerages to maintain a 140% collateral ratio on margin loans. The waiver, effective Monday, is meant to stop forced selling of shares bought with borrowed money.

The KOSPI recovered about a third of its losses after the announcement and traded as high as 5,269.10. Late foreign selling pulled it back near the lows by the close.

Tokyo's worst day since April 2025

Japan's Nikkei 225 closed at 57,434.77, down 3,643.13 points, or 5.96%. The point drop was the third-largest in the index's history, and the close was its lowest since April 13.

Friday's close left the Nikkei 20.6% below its record close of 72,366.34, set on June 25. A fall of 20% or more from a peak is the conventional mark of a bear market.

The selling was broad. The wider TOPIX fell 5.90% to 3,707.99, 98% of stocks on the Tokyo exchange's prime market declined, and only three of the Nikkei's 225 companies rose.

SoftBank Group fell 10.83% to its lowest level in more than a year. Memory-chip maker Kioxia dropped 8.72%, while Advantest closed down 4.99% and Tokyo Electron down 5.60%.

The rout spread beyond chips: Toyota fell 5.52% and Uniqlo owner Fast Retailing lost 3.79%. In swap markets, the priced-in probability of a Bank of Japan rate increase in December fell to as low as 52% during the morning.

The rout was regional; the trigger was American

Taiwan's Taiex fell 4.51% to 39,701.64. TSMC, the world's largest contract chipmaker, closed down 4.69% after touching its daily price limit in early trading.

Hong Kong's Hang Seng fell about 1.3% to 24,481.86. The Shanghai Composite lost 1.10% to 3,649.18.

The trigger was Thursday's U.S. session, the steepest decline since the tariff-triggered rout of April 2025. The Nasdaq Composite sank 5.52% into correction territory, the S&P 500 lost 4.36%, and the Philadelphia Semiconductor Index slumped about 12%.

Investors fear Democrats, who dominated this week's midterm elections, will apply the brakes to the AI boom through tighter scrutiny of data-center construction. The political jitters hit a trade already strained by doubts about the return on enormous AI spending.

“There is also clearly an element of panic in the selling, and positioning is making the adjustment much more violent,” said Charu Chanana, chief investment strategist at Saxo. When investors unwind at once, she said, the selling can become self-reinforcing, particularly where leverage forces liquidation.

What remains unknown

Whether Seoul's margin waiver steadies Korean trading when it takes effect Monday is untested. The measure targets forced selling, not the foreign outflow — about 2.77 trillion won on Friday — that drove the decline.

Japan's close in bear-market territory has drawn no official response so far. What, if anything, Tokyo or the Bank of Japan says before Monday's open remains unknown.

What to watch: Europe's session, after stock futures pointed about 1% lower, and then the U.S. October jobs report at 8:30 a.m. Eastern.

U.S. futures were attempting a bounce in premarket trading Friday — Dow Jones put Nasdaq futures up 1.2% at 4:40 a.m. Eastern, with Nvidia up more than 3%. That is a snapshot, not a settle, and the jobs print can confirm or erase it.