Since mid-2025, driven by an AI-fueled memory super cycle, the Korea Composite Stock Price Index (KOSPI) soared from around 3,100 points to a record high of 9,385 points, nearly doubling in value within the year. AI memory giants like Samsung Electronics and SK Hynix saw their stocks double.
But after July this year, the KOSPI plunged to 6,820 points, a drop of over 27%. On the 29th, the index widened its loss to 12%, triggering the ninth circuit breaker in South Korea this year. SK Hynix fell more than 15%, and Samsung Electronics dropped over 10%, pushing its market cap below $900 billion.
The downturn is mainly due to a cascade of margin calls on leveraged funds, a collective pullback in heavyweight semiconductor stocks, massive foreign capital outflows, and shifting policies—exposing deep structural issues in the economy. South Korea’s overreliance on the semiconductor sector, alongside sluggish domestic demand and other manufacturing, is taking a toll.
In this crash, roughly 320,000 to 460,000 accounts were forcibly liquidated by brokers, leaving some retail investors in debt. Among those blown-up accounts, investors in their 20s and 30s made up over 60%.
The stock market meltdown led to heavy losses for highly leveraged retail investors, spiking psychological stress. A man in his 20s, driven by losses, retaliated by stabbing a financial blogger. There are even unverified reports on social media of group suicide incidents, though no law enforcement or credible media has confirmed such violent events.
Against this backdrop, the South Korean government rolled out a series of measures to curb overheating in individual stock leveraged trading and stabilize market volatility.
HA Viewpoint reports that the Financial Services Commission has decided to bring forward stricter deposit requirements for retail investors trading single-stock leveraged ETFs to July 31, ahead of the original August timeline. The deposit is set at 30 million Korean won (about 140,000 RMB), and must be in cash.
Under the new rules, stocks, ETFs, and bonds won’t count toward the minimum deposit. This applies to both domestic and overseas single-stock leveraged ETFs and ETNs (like those tracking Samsung Electronics or Nvidia). Companies that can’t update their systems by July 31 will be advised to halt new trades in these products.
This measure targets the liquidation risks from individual investors heavily using leveraged products. If the step isn’t enough, the FSC is considering further investment controls, such as capping such ETF investments at 20% of an individual’s total financial portfolio.
To attract more retail money into the KOSPI, single-stock leveraged ETFs tracking Samsung Electronics and SK Hynix launched in late May. These ETFs, along with the two chip stocks they track, now account for over 70% of daily trading volume on the KOSPI.
Kim Yong-beom, head of the Office for Government Policy Coordination, attributed the recent volatility to structural issues like active retail trading, a flood of derivatives, and the overweighting of semiconductor giants—not just leveraged ETFs alone.
The Korea Exchange plans to launch its first batch of ETF futures based on these themes in October, aiming to meet institutional investors’ hedging needs. This marks the first expansion of ETF derivatives since 2017.
The Financial Services Commission already submitted a “Crisis Prevention Plan for Economic Crisis Family Suicide” in mid-July. Head Lee Eog-weon stated that suicides driven by economic crises amount to social murder.
On another front, the government will proactively identify at-risk families, launch a national unified debt counseling hotline, and simplify personal bankruptcy debt certification processes to intervene early with potential targets.