U.S. Midterm Fears Send SK Hynix Shares Down 10.44%

By Rebecca Stone

Korea's KOSPI fell more than 6% on Friday, activating a circuit breaker and sell-side sidecars as SK hynix dropped 10.44% and Samsung Electronics lost 6.35%, according to the editorial.

The decline pushed South Korea's main bourse below 5,000 during trading as investors sold in panic. The editorial treated Friday as more than a routine index move: two semiconductor heavyweights dominate the market, and U.S. political expectations now carry direct consequences for Korean corporate valuations.

What changed after the U.S. midterms?

U.S. indexes rose immediately after last week's elections but fluctuated on Friday, the editorial reported. It described a changed economic climate for investors and policymakers, triggered by a shift in the U.S. political landscape and the balance of power in Congress.

Optimism that the elections had reaffirmed America's "democratic values" gave way to concern, according to the editorial. The editorial said the Democratic agenda included regulating artificial intelligence and restricting data center construction, two policies with direct consequences for Korean chip demand.

It also raised a harder investment question: whether the AI boom constitutes a bubble and whether massive spending in the sector will ultimately generate profits. The editorial said those doubts arrived after aggressive AI investment and a sustained U.S. drive to build data centers had contributed to strong performance by Korea's top chipmakers.

Other Asian stock markets, including Taiwan's, also declined Friday. Seoul's heavier reliance on semiconductors amplified the volatility, while President Lee Jae Myung's strong pledge to tackle the so-called "Korea discount" pushed it higher still, according to the editorial.

The editorial described Friday as a "Black Friday" for the Korean stock market. That reaction did not erase the political shift behind it. Congress had changed, and so had the market outlook for the AI and data-center policies that support Korean memory production.

Those developments form a direct transmission path for the selloff, according to the editorial. U.S. election results altered the policy outlook; the outlook touched AI regulation, data-center construction and expected returns on AI investment; the editorial tied that shift to Korean chipmakers' performance and Friday's decline.

The editorial's argument was that investors no longer had only the semiconductor cycle to price. They also had to weigh a new U.S. political environment, making South Korea's concentrated market structure more vulnerable to an external policy shock.

How concentrated is Korea's market?

The editorial cited four figures to establish the scale of the risk:

• Semiconductors, including high-bandwidth memory and conventional memory chips, account for an estimated 40% of South Korea's total exports.
• Exports are on track to reach a record $1 trillion as early as this month.
• SK hynix and Samsung Electronics together represent about 40% of the KOSPI's total market capitalization.
• The economy is forecast to grow by around 3% this year.

Together, those figures explain why officials could not treat Friday as an isolated index decline. A change in Washington can reach semiconductor demand, corporate valuations and Korea's export outlook at once, while two listed companies carry a combined 40% of KOSPI capitalization.

The editorial said this structure cannot keep driving sustainable growth or producing the surplus profits that fill government coffers. It has called repeatedly for diversification, especially to reduce semiconductor concentration in both exports and the stock market.

At the same time, the editorial warned that South Korea cannot afford to surrender its competitive edge in chips. It said continued investment in research, development and innovation remains necessary, with government plans for three major semiconductor projects.

The current boom also shapes fiscal policy. The editorial said surplus profits from the chip boom gave the government the confidence to pursue its "three megaprojects," even as policymakers search for future growth engines beyond semiconductors.

Diversification would not mean abandoning the sector that currently supplies the export earnings and fiscal surplus. It would mean using today's momentum to reduce the cost of the next external shock, while preserving the research base that produced the present gains.

What did Seoul do to stop the selloff?

Senior officials from South Korea's economic, financial regulatory and monetary agencies convened after the decline, according to the editorial. Their emergency discussions included a three-month exemption from collateral reserve requirements on loans to investors.

The editorial said the proposal aimed to curb further selling and could bring temporary reassurance. It also warned that depressed, distrustful investors may remain wary of government measures, making the exemption a short-term answer rather than a substitute for structural reform.

The editorial's distinction matters because the exemption addresses immediate selling pressure without changing the underlying concentration of exports or market capitalization. Another U.S. policy surprise could test the same vulnerabilities again.

What reforms does the editorial argue for?

The editorial called for deeper changes to guard against future market shocks. It said structural reform takes time, but an economy forecast to grow by around 3% this year has momentum that Seoul can use to diversify its economic base.

Its recommended policy mix starts with deregulation. The editorial said regulators should help revive the automotive, shipping and battery industries, three established industries that could reduce reliance on semiconductors and provide alternative sources of growth.

It also called for support for robotics, biotechnology and small modular reactors. The editorial described those fields as emerging sectors that could become new engines of growth, rather than leaving the country dependent on the chip cycle for a larger share of revenue and investment.

The Lee administration now faces a choice between short-term political management and longer-term economic restructuring, according to the editorial. It said the administration should devote more attention to structural economic challenges and their long-term implications than to domestic political battles.

That warning included the recent passage of a bill authorizing a special counsel investigation into allegations of fabricated indictments targeting President Lee and others. The editorial argued that the administration should redirect its focus toward economic resilience instead.

The next test is whether the Lee administration can turn roughly 3% growth and a record $1 trillion export total into durable diversification while preserving investment in the semiconductor industry that now anchors about 40% of Korean exports.