South Korea’s Stock Market Crash Is Now Officially Worse Than 1997 and 2008
South Korea’s benchmark KOSPI has plunged greater than 33% in July, its worst month in historical past. The collapse surpasses the October 1997 IMF disaster, when the index misplaced 27%, and the October 2008 international monetary disaster at 23%.
The index closed at 5,593.56 on Thursday, down one other 1.23%, after a 5% morning rebound light. A violent unwind of leveraged bets on the nation’s AI chip champions drove the file decline.
Leverage, AI Doubts, and a China Shock Ended a Historic Rally
The KOSPI greater than doubled within the first half of 2026. It gained 116% at its peak and hit an all-time high of 9,385.59 in June, briefly making South Korea the world’s sixth-largest inventory market.
Leverage powered the climb. Outstanding leveraged bets reached a record 29.2 trillion received, roughly $19.7 billion, in early July. Retail traders piled into single-stock ETFs tied to Samsung Electronics and SK Hynix.
The reversal proved simply as excessive. The index entered a technical bear market by mid-July as the worldwide AI commerce unwound, whereas the Bank of Korea delivered its first price hike since 2023.
Then got here the knockout blows. On July 28, reviews that China had begun mass manufacturing of homegrown DUV chipmaking instruments crushed semiconductor shares. SK Hynix’s earnings miss deepened the panic a day later.
SK Hynix posted file second-quarter income of 79.3 trillion received, but nonetheless missed LSEG estimates of 84 trillion received. The inventory fell 9.61% on Wednesday. Over the previous month, Samsung has misplaced 35.45% and SK Hynix 46.69%.
Circuit breakers halted buying and selling on July 28 and 29, the primary time they fired on consecutive periods. The two days erased 864.5 trillion received and prompted an emergency meeting of South Korea’s high monetary authorities.
Finance Minister Koo Yun-cheol conceded the leveraged merchandise deserved nearer scrutiny earlier than launch.
“We’ve already put in place a package deal of measures, but when it’s wanted we’ll introduce further steps to assist normalise the market.”
5 Reasons Behind the South Korea Stock Market Crash
The selloff had no single set off. Five forces hit a stretched market on the similar time.
| Reason | What occurred |
|---|---|
| Record leverage | 29.2 trillion received ($19.7 billion) in leveraged bets, with single-stock ETFs magnifying each swing |
| AI commerce unwind | Global doubts over AI spending hit a market the place two chipmakers dominate the index |
| China chip shock | Mass manufacturing of homegrown DUV instruments and the $8.6 billion CXMT IPO threatened DRAM costs |
| SK Hynix earnings miss | Record Q2 income of 79.3 trillion received nonetheless fell wanting the 84 trillion received estimate |
| Tightening and outflows | The Bank of Korea’s first price hike since 2023, plus heavy overseas and institutional promoting |
Each issue fed the following. Falling costs triggered margin calls, compelled promoting deepened the losses, and leveraged ETFs mechanically bought extra into the decline.
KOSPI Chart Shows a Crash Deeper Than COVID as 5,100 Support Holds
The month-to-month chart places the collapse in historic context. July’s candle opened at 8,591.50 and fell as little as 5,262.77, a 38.95% drop from the month’s high of 8,620.15.
That transfer is now sharper than the COVID-19 crash (blue zone). In March 2020, the KOSPI fell 31.10% from high to low earlier than staging a multi-year restoration. Measured from June’s file high of 9,385.59, the present drawdown approaches 44%.
Buyers have defended the primary assist zone thus far. The index tapped the 5,100 to five,300 space this week, and the July low landed inside it earlier than Thursday’s modest bounce try.
If the zone breaks, the draw back opens significantly. The subsequent main assist sits between 3,200 and 3,400, the world that capped the index in 2021. That zone lies roughly 40% beneath present ranges.
Regulators’ new curbs on leveraged ETFs could resolve what comes subsequent. Either the 5,100 ground holds and stabilization begins, or the file crash finds one other leg decrease.
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