AI Rout Crosses the Pacific: Korea Halts Trading, Japan Slips Into Bear Market

Korea's market hit the brakes first. The KOSPI dropped 8.52% by 9:03 a.m. local time on November 6, landing at 4,924.61 and triggering a 20-minute trading halt, followed by a shorter sidecar pause at 9:34 a.m. That marked the 11th first-level circuit breaker in Korea this year, a sign these halts have become routine rather than rare.

Tokyo's damage ran deeper in percentage terms. The Nikkei fell more than 20% below its June peak during the session, the standard bar for a bear market, bottoming at 56,745.81 before clawing back to 57,583.76 by 11:18 a.m. By 247wallst.com's math, the 20% threshold sits near 58,265, so a close above that line would erase the bear label.

The fire started in New York on November 5. The S&P 500 shed 4.4% that day, and the PHLX Semiconductor Index got gutted, down 12.25%, amid worries that costly borrowing and Democrats' midterm wins could slow AI data center construction. iShares MSCI South Korea ETF fell 13.46% to $131.65, while iShares MSCI Japan ETF lost 5.97% to $88.26. Neither close captured the Asian session, so both funds absorb that move when New York reopens.

Concentration explains the gap. Samsung Electronics made up about 22.1% of EWY's net assets and SK hynix about 21% as of August 31 holdings, and on the morning of November 6 they fell 10.07% and 12.26% respectively. EWJ spreads its bets: Advantest dropped roughly 12% and Tokyo Electron nearly 9%, but each accounted for under 3% of the fund. Taiwan joined the slide, with TSMC opening about 9.8% lower at NT$2,020 before recovering to NT$2,120 by 10:13 a.m.

Officials in both countries stayed cautious. Finance Minister Lee Hyoung-il, also Deputy Prime Minister, said the government will act against excessive volatility and prepare measures in advance, adding that Korea's fundamentals remain solid, though the country has not tapped its stock market stabilization fund or a temporary short-selling ban. Japanese Prime Minister Sanae Takaichi told parliament she knew AI and chip stocks were falling sharply but could not say whether the drop was temporary, and announced no measures.

There were flickers of relief: Nasdaq 100 futures were up 1.20% at 9:19 p.m. ET on November 5, and the KOSPI climbed back to 5,123.41 by 11:14 a.m., still 4.84% below its 5,383.80 close and roughly 45% under its 52-week high of 9,385.59, per 247wallst.com's calculation. EWY remained up 35.41% for the year as of November 5 despite a 29.37% slide over the prior month. For investors wanting less exposure to one pair of memory chip makers, Vanguard FTSE Developed Markets ETF spreads its holdings across Japan, Korea, Europe, Canada and Australia.