Concerns over the inflationary impact of oil prices are ending the frenzy of AI trading in Asia, with foreign capital accelerating its withdrawal, and the South Korean stock market being the hardest hit.On Wednesday, the Korea Composite Stock Price Index (KOSPI) plunged more than 12% at one point, triggering a circuit breaker and halting trading for 20 minutes. The cumulative decline over two days expanded to 20%, erasing all gains made in February and marking the worst two-day drop since 2008.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/640b4683-a6d9-47f8-a589-5f8a0a6a7e82.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/640b4683-a6d9-47f8-a589-5f8a0a6a7e82.png"/>According to Bloomberg, foreign investors net sold approximately $3.1 billion in South Korean stocks and about $3.6 billion in Taiwanese stocks this week, with both markets facing the largest single-week capital outflow since the end of December last year.This round of selling is concentrated on previously leading chip stocks. Samsung Electronics and SK Hynix each fell nearly 20% this week, while TSMC's decline exceeded 5%. The South Korean won closed down 3.3% on Tuesday, marking the largest single-day drop since 2009, indicating that global capital is not only selling stocks but also hedging risks in the foreign exchange market.Tareck Horchani, head of Maybank Securities' Singapore bulk brokerage, stated that this sell-off resembles position liquidation and risk contraction rather than a substantial deterioration in profit fundamentals. When oil prices surge and foreign exchange volatility spikes, global capital tends to quickly withdraw from the most liquid index-weighted stocks—this sell-off is concentrated on these targets.<h2>AI Crowded Trades Encounter Geopolitical Shock, Funds Compete to Reduce Exposure</h2>Before this wave of selling erupted, the Asian market had long remained immune to warnings about the AI bubble. The KOSPI was once the best-performing market globally this year, with regional chip suppliers viewed as reasonably valued and benefiting from the continued capital expenditures of tech giants, leading to a sustained accumulation of long positions.However, the sharp deterioration of the situation in the Middle East became the tipping point for the market. Matthew Haupt, portfolio manager at Wilson Asset Management in Sydney, stated, &#34;As the situation in Iran seems to worsen, crowded long positions in AI and other sectors are being sold off en masse, with investors competing to reduce exposure across the market.&#34; He added that the impact on AI-related stocks is particularly concentrated, with lingering doubts about whether the sector's massive capital expenditure plans can ultimately translate into sufficient profits.Market concerns that soaring oil prices will drive up inflation and delay the Federal Reserve's interest rate cuts have accelerated the unwinding of high-positioned trades accumulated due to the AI narrative.Bloomberg strategist Garfield Reynolds pointed out that as long as concerns about the potential further surge in crude oil prices persist, the downward trend in Asian stock markets is unlikely to end. The Asia-Pacific region's high dependence on Middle Eastern oil and gas means that severe fluctuations in crude oil futures will force investors to continuously factor in the worst-case scenarios<h2>Capital may flow back after the situation becomes clear, but short-term volatility is hard to calm</h2>This sharp decline has exposed the market's vulnerability under crowded positions—despite the long-term fundamental logic not fundamentally changing, many investors still choose to sell first and ask questions later. The South Korean won and the New Taiwan dollar have become some of the worst-performing currencies in Asia this month, further confirming that global capital is simultaneously pushing for stock sell-offs and currency hedging.Kerry Craig, a global market strategist at JP Morgan Asset Management, stated on Bloomberg Television on Wednesday that in the face of rising risks in the Middle East, investors &#34;need to pay attention to appropriate diversification and hedging strategies in their portfolios.&#34;He also pointed out that &#34;once the outlook begins to improve, we may see investors flowing back into these markets.&#34;Risk warning and disclaimerThe market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at their own risk

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07747

KORU

Due to concerns over rising oil prices, overseas funds are rapidly withdrawing from the Asian AI market, leading to a sharp decline in the South Korean stock market. On Wednesday, the Korea Composite Stock Price Index fell more than 12% at one point, triggering a circuit breaker, with a cumulative decline of 20%, marking the largest two-day drop since 2008. Overseas investors net sold approximately $6.7 billion in South Korean and Taiwanese stocks this week, primarily focusing on chip stocks. Market confidence in AI-related stocks has weakened, prompting investors to reduce their risk exposure

Wallstreetcn

XL2CSOPHYNIX

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Direxion Daily Korea Bull 3x Shares ETF

ISHRS MSCI S Korea Capped

HSBC MSCI Korea Capped UCITS ETF

BlackRock, Inc.

Concerns over oil price shocks lead to overseas funds withdrawing from the Asian AI boom, causing a sharp decline in South Korean stocks