Significant Decline in South Korean Stock Market, KOSPI Index Drops Sharply from Highs
The South Korean stock market has seen a significant decline, with the benchmark KOSPI index dropping sharply from its highs.
Chip heavyweights Samsung and SK Hynix led the decline, exacerbating market volatility and triggering a large number of margin calls on leveraged accounts.
Foreign and retail investors' sell-offs have created an event-driven downward trend, with funds flowing into safe-haven assets, while high-valuation technology stocks and leveraged trading are under pressure, benefiting cash and defensive sectors.
Source: Public Information
ABAB AI Insight
In the first half of 2026, the South Korean stock market became one of the best-performing markets globally due to the AI and memory chip boom, with the KOSPI peaking in June after a significant rise, followed by a rapid correction due to concerns over chip demand and leveraged liquidations.
In terms of capital flow, large-scale reductions by foreign investors and the chain liquidation of local retail investors' high-leverage accounts created negative feedback, with funds flowing out of high-valuation stocks like Samsung and SK Hynix, shifting towards low-volatility assets, motivated by the desire to lock in previous gains and reduce risk exposure.
Similar cases can be seen in the leveraged liquidations during the tech stock corrections in the US from 2021-2022, as well as the historical sensitivity of the South Korean market to the global semiconductor cycle; currently, the South Korean stock market is in a phase of retreating AI narratives and valuation corrections.
This essentially represents a transfer of pricing power: the market is shifting from pricing based on growth expectations to pricing based on risk and leveraged liquidations, with the mechanism being high concentration and high leverage amplifying volatility, causing changes in a single industry's prosperity to quickly transmit to the overall index.
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