South Korean shares saw a sharp decline today, with the KOSPI index dropping by over 7% to 6,128.32, effectively wiping out the majority of last Friday's historic 17.91% surge. This downturn was largely led by the technology sector, as major chipmakers Samsung Electronics and SK Hynix, which had seen record-breaking gains on Friday, fell by 8.5% and 10.2% respectively. This volatility comes after a period where the KOSPI had already experienced a monthly decline of approximately 22% in July, marking it as the third-largest monthly drop in history.
The recent market swings have been attributed to a combination of factors, including extreme fund flow instability and a debate over the staying power of the AI investment boom. While Microsoft and Amazon's positive earnings reports and commitment to AI investment had initially sparked renewed confidence and led to Friday's rally, analysts like Han Ji-young from Kiwoom Securities noted that the underlying sentiment remained fragile due to uncertainty regarding the market's direction. Foreign investors, who were major buyers during Friday's rebound, turned to net selling today, indicating a lack of sustained confidence.
Retail investors have been particularly hard-hit by this volatility. According to KB Financial Group, South Korean retail investors had made net purchases of around 14 trillion won ($9.7 billion) in single-stock leveraged ETFs prior to the crash. Following the market collapse, which saw a nearly 40% decline over five weeks, over 1.2 million retail investors faced margin calls, and around 360,000 accounts were forcefully liquidated. More than 60% of these liquidated investors are under 30, with many not only losing their investments but also incurring significant debt, fueling anger and protests against current market conditions and political leaders.
