South Korea's benchmark Kospi index snapped a three-day winning streak, with declines in automotive and semiconductor stocks. The Kospi closed down 5.7% at 6,690.62 points. The South Korean stock market suffered a sharp sell-off on Friday, driven by fears that a slowdown in artificial intelligence (AI) spending by major U.S. tech giants could weigh on the outlook for Asia's large chipmakers. Additionally, oil prices remaining above $100 per barrel further dampened market sentiment.

During the trading session, the Korea Exchange triggered a five-minute trading halt after the Kospi index futures fell more than 5%.

The Kospi recorded a weekly decline of 1.9%.

As South Korean authorities intensify efforts to curb extreme market volatility, the country is accelerating the implementation of stricter minimum cash margin requirements for investments in leveraged exchange-traded funds (ETFs).

The Financial Services Commission (FSC) of South Korea stated on Friday that the effective date for the new cash deposit rule will be moved forward from August to the end of July.

Under the new regulation, investors must hold or maintain at least 30 million won (approximately $20,330) in cash margin or account balance when making new or additional investments in single-stock leveraged ETFs or exchange-traded notes (ETNs).

This measure is part of a broad policy package announced last week, aimed at curbing market volatility by raising leverage costs and raising the threshold for short-term speculation. Regulators believe that leveraged products are amplifying market fluctuations.

In conjunction, authorities have suspended the listing of new leveraged ETFs and ETNs and have prohibited securities firms from marketing these products.

Volatility in the South Korean stock market is intensifying. This follows a period where retail investors used margin loans to heavily funnel into single-stock ETFs linked to Samsung Electronics and SK Hynix.