South Korean equities declined more than 1 percent on Thursday, extending a two-day rout, as retail investors aggressively sold technology shares amid growing doubts about artificial intelligence spending returns and uncertainty surrounding the Federal Reserve's interest rate trajectory. The Korean won firmed against the US dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) endured a volatile session before closing at 5,593.56, down 69.68 points, or 1.23 percent. The index briefly touched an intraday low of 5,547.41 after having opened 0.33 percent higher and reaching as high as 5,976.82 earlier in the day before reversing course.

Analysts attributed the broad-based sell-off to two overlapping concerns: the Fed's lack of clear guidance on future monetary policy and renewed questions about whether massive AI-related capital expenditures by major technology firms will produce returns adequate to justify their current valuations. The unease has particular resonance in Seoul, where semiconductor and tech majors count among the world's leading suppliers of memory chips and components powering AI infrastructure.

On Wednesday, the Federal Reserve held its benchmark interest rate steady at 3.5–3.75 percent — the fifth consecutive meeting without a change. The US central bank provided minimal direction on the outlook for rates, leaving investors uncertain about when any easing might occur. Persistent rate uncertainty complicates the valuation picture for growth-oriented equities across Asia, especially export-heavy markets like South Korea's.

Trading volume was moderate, with 375.17 million shares changing hands valued at 37.6 trillion won ($26.2 billion). Gainers outnumbered losers 606 to 277.

Institutional investors sold a net 66.3 billion won worth of stocks, while foreign investors offloaded a net 1.34 trillion won. Retail individuals were net sellers of 1.43 trillion won.

Technology stocks bore the brunt of the declines. Samsung Electronics, the market bellwether, slipped 0.72 percent to 207,000 won, while memory-chip giant SK hynix plunged 5.64 percent to 1.32 million won. SK hynix is a dominant supplier of high-bandwidth memory used in AI accelerators, making its shares especially sensitive to shifts in AI capex sentiment. Internet platform Naver slid 4.05 percent to 201,500 won.

Among other blue chips, Hyundai Motor fell 0.71 percent to 351,000 won, Korean Air declined 0.6 percent to 24,650 won, and Doosan Enerbility dipped 0.99 percent to 60,200 won.

Not all shares moved lower. HD Korea Shipbuilding & Offshore Engineering surged 10 percent to 368,500 won after announcing it had signed a memorandum of understanding with US-based Fraser Industries LLC to support the revitalization of the American shipbuilding sector under Seoul's "Make American Shipbuilding Great Again" initiative. Defense contractor Hanwha Aerospace jumped 6.79 percent to 865,000 won.

In currency markets, the Korean won was quoted at 1,437.4 against the US dollar as of 3:30 p.m., strengthening from 1,446.7 won the previous day. (Yonhap)