South Korea’s benchmark KOSPI has plunged more than 33% in July, its worst month in history. The collapse surpasses the October 1997 IMF crisis, when the index lost 27%, and the October 2008 global financial crisis at 23%.
The index closed at 5,593.56 on Thursday, down another 1.23%, after a 5% morning rebound faded. A violent unwind of leveraged bets on the country’s AI chip champions drove the record decline.
Leverage, AI Doubts, and a China Shock Ended a Historic Rally
The KOSPI more than doubled in 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 stock market.
Leverage powered the climb. Outstanding leveraged bets reached a record 29.2 trillion won, roughly $19.7 billion, in early July. Retail investors piled into single-stock ETFs tied to Samsung Electronics and SK Hynix.
The reversal proved just as extreme. The index entered a technical bear market by mid-July as the global AI trade unwound, while the Bank of Korea delivered its first rate hike since 2023.
Then came the knockout blows. On July 28, reports that China had begun mass production of homegrown DUV chipmaking tools crushed semiconductor stocks. SK Hynix’s earnings miss deepened the panic a day later.
SK Hynix posted record second-quarter revenue of 79.3 trillion won, yet still missed LSEG estimates of 84 trillion won. The stock fell 9.61% on Wednesday. Over the past month, Samsung has lost 35.45% and SK Hynix 46.69%.
Circuit breakers halted trading on July 28 and 29, the first time they fired on consecutive sessions. The two days erased 864.5 trillion won and prompted an emergency meeting of South Korea’s top financial authorities.
Finance Minister Koo Yun-cheol conceded the leveraged products deserved closer scrutiny before launch.
“We’ve already put in place a package of measures, but if it’s needed we’ll introduce additional steps to help normalise the market.”
5 Reasons Behind the South Korea Stock Market Crash
The selloff had no single trigger. Five forces hit a stretched market at the same time.
