A bull market fueled by the artificial intelligence boom is now reversing in spectacular and devastating fashion across South Korean equities. Over the past week, the sell-off has morphed from a straightforward price correction into a full-blown credit event rippling through society.
According to data from South Korea’s Financial Supervisory Service, as of July 13, more than 1.2 million leveraged retail investor accounts nationwide had triggered margin calls. Scaled against South Korea’s population, this means one in every 30 adults faces the risk of forced liquidation. Cumulative forced liquidations in July have already reached ₩344.2 billion (approximately $231.6 million), with a single-day record of ₩142.2 billion (approximately $95.7 million) on July 9 alone—a nearly fivefold surge from the previous day’s ₩28.8 billion (approximately $19.4 million).
On July 16, the KOSPI index suffered another crushing blow, plummeting 463.81 points, or 6.37%, to close at 6,820.60. Heavyweight stocks collapsed across the board, with SK Hynix tumbling 11.62% and Samsung Electronics (005930.KS) falling 8.23%. Just three days earlier on July 13, the KOSPI had endured a “bloodbath,” crashing nearly 9% in a single session and breaching the 7,000-point threshold.
Zooming out from daily swings, the bull market has suffered multiple cascading routs since peaking in June. The table below outlines the key single-day crashes during this meltdown:
DateKOSPI Single-Day PerformanceKey ContextJune 23-9.99%First major crash after peakJuly 2-7.89%Second wave of sellingJuly 13-8.95%Breached 7,000-point levelJuly 16-6.37% (closed at 6,820.60)Broad collapse in heavyweight stocks
The ferocity of this unwinding stems from leveraged capital being heavily concentrated in a handful of semiconductor heavyweights. According to the Korea Financial Investment Association (KOFIA), total margin loan balances on the KOSPI stood at ₩27.4 trillion as of July 13. Four stocks alone—Samsung Electronics (₩5.29 trillion), SK Hynix (₩5.23 trillion), Samsung Electronics preferred shares (₩395.9 billion), and SK Square (₩363.8 billion)—accounted for 41.1% of the total, amounting to approximately ₩11.28 trillion. Such extreme concentration means that when these stocks decline in unison, forced selling becomes self-reinforcing. The cumulative declines of these four “margin-heavy” stocks from late June to mid-July represent the epicenter of the stampede:
StockCumulative Decline (Late June to Mid-July)SK Square29.9%SK Hynix27.8%Samsung Electronics21.2%Samsung Electronics Preferred Shares14.2%
The pace of forced liquidations has also intensified sharply in July. KOFIA data shows that actual forced liquidation amounts triggered by unpaid trade obligations have totaled ₩452 billion (approximately $304.1 million) so far in July, averaging over ₩50 billion (approximately $33.6 million) per day—nearly double the first-half daily average of ₩25.7 billion (approximately $17.3 million).
Mechanically, this is a classic leveraged reflexivity spiral, where price declines and forced liquidations feed off each other in a mutually amplifying loop:
John Woods, Chief Investment Officer for Asia at Lombard Odier, said in a Bloomberg Television interview: “I have long been deeply concerned about the speculative frenzy in South Korea’s retail market. As a general rule, this rarely ends well.”