Kospi Volatility Index<\/a> surged 27% to hit a record high on Wednesday at the height of the sell-off. It has since dipped to around 8% on Thursday, but remains at record high levels.\u00a0<\/p>\nRetail leverage amplifies swings<\/p>\n
Another factor amplifying the market’s moves is South Korea’s large base of retail investors and its active derivatives market, according to market veterans.\u00a0<\/p>\n
“This is just too much of the leverage trading that’s affecting the market,” said Daniel Yoo, global strategist at Yuanta Securities.<\/p>\n
“We had a huge amount of margin calls for retail investors. So they just dumped it… And then [on Thursday] it went back up again. It has nothing to do with fundamentals.”<\/p>\n
Retail investors have been among the biggest buyers of Korean stocks since the start of the year, often using margin accounts and via leveraged exchange-traded funds. That means sharp market drops can quickly trigger forced selling as margin calls hit, said Yoo.<\/p>\n
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Individual investors were the biggest participants in South Korea’s stock market on Thursday, according to data from the Korea Exchange.\u00a0<\/p>\n
Individual traders sold 19.7 trillion won ($13.3 billion) worth of Kospi stocks and bought about 21 trillion won, making them the largest buyers on the market and leaving them with net purchases of roughly 1.3 trillion won.<\/p>\n
Individual investors accounted for the largest share of trading on the Kospi on Thursday, making up about 45% of total turnover, compared with roughly 33% for foreign investors and 22% for institutions, according to Korea Exchange data on Thursday.<\/p>\n
Adding to the turbulence is Korea’s sensitivity to energy prices. As a large importer of crude oil, the country is particularly vulnerable to disruptions in global supply. <\/p>\n
“While we had seen sell-offs in major equity markets driven by the uncertainties around the Middle East, it has been more pronounced in South Korea [on Tuesday and Wednesday] given its relatively higher dependence on crude oil imports,” said JPMorgan Asset Management’s global market strategist Raisah Rasid.<\/p>\n
Semiconductor cycle still supportive<\/p>\n
For now, the market’s choppiness may simply reflect the unwinding of an overheated rally, said\u00a0 KB Securities’ Kim.<\/p>\n
“Given the scale of leveraged position of Korean retail investors and the expected prolonged uncertainty from the Iran situation, it would be premature to call for an immediate V-shaped recovery,” he added.<\/p>\n
But with semiconductor earnings still strong and valuations stabilizing, other market watchers believe the underlying fundamentals of South Korea’s equity market remain intact, particularly in the semiconductor sector that dominates the index.<\/p>\n
“The pullback appears to be knee-jerk and more sentiment-driven at this stage, rather than fundamentally driven,” said Kieron Poon, investment director of Asian equities at Aberdeen Investments.<\/p>\n
Memory prices, particularly for Dynamic Random Access Memory (DRAM), have been rising after a strong 2025 and are expected to continue growing through the first half of 2026, supporting earnings for Korean chipmakers, he said.<\/p>\n
JPMorgan’s Rasid echoed that view, saying the long-term drivers for Korean equities remain strong.<\/p>\n
“While there are concerns around demand destruction and inventory hoarding, demand-supply dynamics in the memory chips space is likely to remain tight through this year and possibly the next,” she said.<\/p>\n
Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"TOPSHOT – Currency dealers monitor exchange rates in a foreign exchange dealing room at the Hana Bank headquarters…\n","protected":false},"author":2,"featured_media":3800,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[457],"tags":[3506,3508,3507,2514,3505,3504,2512,337,3511,864,3510,451,2513,33,3509],"class_list":{"0":"post-3799","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-korea-exchange","8":"tag-lco26q","9":"tag-asia-economy","10":"tag-breaking-news-markets","11":"tag-business-news","12":"tag-franklin-ftse-south-korea-etf","13":"tag-ishares-msci-south-korea-etf","14":"tag-ishares-semiconductor-etf","15":"tag-korea-exchange","16":"tag-kospi-index","17":"tag-krx","18":"tag-lp","19":"tag-markets","20":"tag-micron-technology-inc","21":"tag-south-korea","22":"tag-united-states-oil-fund"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/3799","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=3799"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/3799\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/3800"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=3799"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=3799"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=3799"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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