Seoul Stocks Decline Following DeepSeek Surprise; Korean Won Hits Two-Week Low

(ATTN: ADDS bond yields at bottom, photo)

SEOUL, Jan. 31 -- South Korean stocks decreased on Friday after a week-long holiday, primarily due to a significant drop in technology shares following the unexpected impact of the Chinese AI startup DeepSeek. The Korean won also saw a notable decline against the U.S. dollar, reaching a two-week low.

The benchmark Korea Composite Stock Price Index (KOSPI) fell by 19.43 points, representing a 0.77 percent decline, closing at 2,517.37. The KOSPI market was closed from Monday through Thursday in observance of the Lunar New Year holiday.

Trading volume was moderate, with 443 million shares changing hands, valued at approximately 13.3 trillion won (around $9.14 billion). In the market, there were more losers than winners, totaling 560 losers to 333 winners.

Foreign investors sold off local shares worth 1.2 trillion won, while retail and institutional investors collectively purchased shares totaling 1.16 trillion won.

This photo shows a dealing room at Hana Bank in central Seoul on Jan. 31, 2025. The benchmark Korea Composite Stock Price Index (KOSPI) dropped 19.43 points, or 0.77 percent, to close at 2,517.37. (Yonhap)

According to Lee Kyoung-min, an analyst at Daishin Securities, "The KOSPI experienced volatility in shares related to semiconductors and electronics due to the shock from DeepSeek that impacted global markets during the holiday period." Lee added, "DeepSeek's AI model, which is noted for its cost efficiency and performance, has raised concerns about a potential slowdown in investments in advanced chips, data centers, and electric facilities."

The recent introduction of DeepSeek's cost-effective AI models has shaken global stock markets, as some experts believe these models can compete against established technologies from U.S. tech giants.

Despite the turmoil in Seoul, major U.S. indices saw gains overnight, as investors capitalized on lower prices in tech shares, encouraged by positive data highlighting the strength of the U.S. economy.

In Seoul, shares of Samsung Electronics decreased by 2.42 percent to 52,400 won, while its competitor SK Hynix dropped significantly by 9.86 percent to 199,200 won. Other notable declines included major biotechnology firm Samsung Biologics, which fell by 0.55 percent to 1.08 million won, and Hanwha Aerospace, involved in aerospace and defense, which saw a decrease of 2.79 percent to 400,000 won.

Amid the overall downturn, companies in IT and software sectors were more stable, benefiting from indications that developing advanced AI models may not require extensive computational resources, such as specialized AI chips. For instance, internet portal operator Naver surged by 6.13 percent to 216,500 won, while Kakao, known for its leading mobile messaging service, soared by 7.27 percent to 38,350 won.

Financial shares also had a positive day, with KB Financial rising by 3.15 percent to 91,700 won, Shinhan Financial increasing by 2.2 percent to 51,100 won, and Meritz Financial climbing by 4.48 percent to 114,200 won. Additionally, construction and trading firm Samsung C&T experienced a rise of 4.26 percent to 119,900 won, and Samsung Fire & Marine Insurance jumped 11.71 percent to 381,500 won. Krafton, the company behind the global game PUBG: Battlegrounds, saw its stock increase by 6.12 percent to 364,000 won.

At 3:30 p.m., the local currency was reported at 1,452.7 won against the U.S. dollar, a drop of 21.4 won from the previous session, marking its lowest value since January 17.

Bond prices displayed a mixed outcome, which typically indicates movements in bond yields. The yield on three-year government bonds increased by 0.3 basis points to 2.573 percent, while the yield on the benchmark five-year government bonds decreased by 0.3 basis points to 2.701 percent.

stocks, DeepSeek, KOSPI, AI, investments