Korean stock market loses $2 trillion as Hynix disappoints
The korean stock market wiped as much as $2.18 trillion in market value as the KOSPI plunged for a second day, closing down 6% after diving as much as 12.6%, after SK Hynix’s six-fold profit jump still missed lofty expectations and leveraged AI-chip trades unwound. The slide has erased nearly 40% of the index from a peak a little more than a month ago, putting July on course for the steepest monthly decline on record, Reuters reported.
Key Takeaways
- Seoul equities lost up to $2.18 trillion as the KOSPI fell 6% after an intraday drop of as much as 12.6%.
- SK Hynix closed down 9.6% despite a six-fold profit rise that lagged expectations; Samsung Electronics closed down 5.2%.
- Officials moved to curb single-stock leveraged ETFs, citing limits of up to 20% of an investor’s holdings as an example.
- Economist Paul Krugman cast the KOSPI slide as a crisis of faith in AI capital-expenditure hopes.
- Even after the rout, the KOSPI was still up 41.5% year to date in U.S. dollar terms.
What happened to the korean stock market this week?
Asia’s AI-fueled chip rally flipped into a forced selloff. Brokers shut leveraged positions as small investors who borrowed to chase memory stocks faced mounting losses, Reuters said, and volumes were light as buyers stepped aside.
SK Hynix shares slumped nearly 20% before closing down 9.6%. Samsung fell as much as 14% before finishing 5.2% lower. Together the two chipmakers make up more than half of the KOSPI’s market value. U.S.-listed SK Hynix shares fell 5.9% in premarket trading.
Semiconductor stocks elsewhere in Asia also sold off: Taiwan’s TSMC fell 3.5%, UMC dropped 9.7%, and Japan’s Kioxia plunged 13.9%.
Why did SK Hynix results fail to stop the selloff?
Blockbuster earnings were not enough. SK Hynix reported a six-fold jump in profit, but the print lagged the lofty bar investors had priced for the AI memory boom. Panic selling followed Tuesday’s near-11% KOSPI rout, Kiwoom Securities analyst Han Ji-young said, with doubts that the index had found a bottom.
Societe Generale’s Frank Benzimra called it a crowded trade being unwound, noting the hardest-hit names were those with the most leverage. BNY’s Wee Khoon Chong said leverage in Korean equities remained high and a further unwind could be expected.
How are regulators responding to the ETF-fueled volatility?
Finance Minister Koo Yun-cheol apologised under parliamentary pressure for launching single-stock leveraged ETFs without enough care. He met the Bank of Korea governor and financial regulators late Wednesday—two weeks after tighter ETF rules were announced on July 16.
The finance ministry said it would pursue immediate further curbs on single-stock leveraged products, including individual investment limits, higher trading costs, and simulated trading requirements, plus a legal basis for emergency market-stabilisation steps. Follow more moves in our Fintech & Crypto Alerts coverage.
Does the KOSPI crash signal a broader AI bust?
In When the Chips Are Down, Paul Krugman argued Korea’s KOSPI—given the country’s semiconductor concentration—has become a barometer of expectations for AI capital spending. The chart, he wrote, looks like a real crisis of faith and the end of early euphoria, though it does not by itself point to a U.S. recession because so much AI investment has gone into imported equipment.
Pictet’s Jon Withaar pointed to panic and forced unwinds ahead of hyperscaler earnings and the Fed decision. For U.S. and UK readers watching AI trades, Seoul’s record rout is the clearest market stress test yet of whether chip CapEx can keep justifying sky-high valuations.