South Korea’s KOSPI index nosedived over 33% in July 2026, marking its worst monthly performance ever and outstripping the 27% crash during the IMF crisis in October 1997 as well as the 23% plunge seen in the 2008 global financial meltdown. The index closed at 5,593.56 on July 30, dropping another 1.23% despite a brief 5% rebound earlier that day.

This collapse was driven by a sharp unwind of leveraged bets on South Korea’s leading AI chipmakers, which had fueled an extraordinary rally earlier this year. The benchmark had surged 116% through the first half of 2026, reaching an all-time high of 9,385.59 in June and briefly positioning South Korea as the world’s sixth-largest stock market.

use and Market Shocks Trigger Sudden Reversal

Retail investors heavily loaded up on single-stock ETFs tied to giants like Samsung Electronics and SK Hynix, pushing outstanding leveraged bets to an unprecedented 29.2 trillion won (around $19.7 billion) in early July. But the rally unraveled quickly. By mid-July, KOSPI had entered a technical bear market amid a global selloff in AI stocks and South Korea’s central bank increased interest rates for the first time since 2023.

The final blow came when reports surfaced on July 28 that China started mass-producing domestically made deep ultraviolet (DUV) chipmaking equipment, hammering semiconductor stocks. SK Hynix’s Q2 earnings miss added to the panic as the company reported 79.3 trillion won in revenue versus the expected 84 trillion won, dragging its shares down 9.61%. Over the past month, Samsung’s stock fell 35.45% and SK Hynix plummeted 46.69%.

Emergency Measures and Market Impact

South Korea’s circuit breakers were triggered on two consecutive sessions for the first time, wiping out 864.5 trillion won in market value within 48 hours. The intense volatility forced an emergency meeting among the country’s top financial officials. Finance Minister Koo Yun-cheol admitted that leveraged products needed tighter oversight and pledged further steps to stabilize the market if necessary.

  • Record use reached 29.2 trillion won ($19.7 billion).
  • AI sector selloff reversed massive gains from early 2026.
  • China’s chip equipment production undercut semiconductor stocks.
  • Hawkish Bank of Korea rate hike added pressure.
  • SK Hynix’s earnings miss fueled further selling.

South Korea’s KOSPI Loses Trillions Amid AI Sell-Off details how retail investors were impacted during the crash, highlighting the risks of concentrated bets on a few big tech names.

This material is for informational purposes and does not constitute financial advice.