South Korea's Finance Minister Lee Hyoung-il on Friday, 6 November signalled that financial authorities are prepared to roll out additional market stabilisation measures after an AI-driven panic sent the country's benchmark stock index into a sharp spiral, triggering an emergency circuit breaker. The announcement came hours after the Korea Composite Stock Price Index (KOSPI) plummeted more than 8 percent, briefly sinking below the psychologically significant 5,000-point level.

Emergency Response by Authorities

Following an emergency meeting of senior officials from the Financial Services Commission, the Financial Supervisory Service, and the Bank of Korea, Minister Lee sought to calm fraying nerves. "The authorities are closely monitoring excessive anxiety and one-sided movement. We are ready to take additional actions should market volatility accelerate," Lee said. He emphasised that South Korea's economic fundamentals remain solid and urged investors not to remain "excessively anxious and skeptical."

As a concrete first step, the financial authorities announced that collateral regulation on loans extended to buy stocks will be fully lifted for three months starting later this month, a move aimed directly at reducing margin-call pressure and easing market volatility.

Circuit Breaker Activated, KOSPI Swings Wildly

Shortly after the opening bell on Friday, trading of KOSPI-listed shares was suspended for 20 minutes after the benchmark index plunged by more than 8 percent — the first such trading halt in 16 trading sessions. The circuit breaker mechanism, designed to prevent panic-driven free falls, was triggered amid a wave of tech sell-offs. At 11:59 a.m., the KOSPI stood at 5,186.68, down 3.55 percent or 191.22 points, after touching a session low of 4,911.28.

AI Fears and Wall Street Spillover

The immediate trigger for the rout, according to reports, was a combination of two concerns: fears that demand for memory chips will slow due to tighter regulations on AI-related sectors, and anxiety that a Democratic Party victory in the US midterm elections could reduce the pace of data centre construction for artificial intelligence. Taking a direct cue from a tech sell-off on Wall Street overnight, the KOSPI's steep decline underscored South Korea's heavy structural exposure to global AI investment cycles. Notably, the country's semiconductor and memory chip makers — among the world's largest — have become a proxy for global AI sentiment.

This comes amid a broader global reckoning over whether the AI-driven capital expenditure boom of the past two years is sustainable in the face of regulatory headwinds and shifting political winds in the United States.

What Comes Next

Market participants and analysts will be watching closely for specific details of the additional stabilisation measures hinted at by Minister Lee. The three-month collateral regulation lift is a temporary buffer, but investors are looking for clarity on whether authorities will deploy broader tools — including potential stock-buyback facilitation or expanded liquidity injections. The speed of recovery in Wall Street tech stocks and any formal US policy signals on AI regulation will likely determine how long Seoul's volatility persists.