South Korea’s stock market fell 27% from its peak in 24 days, ending one of the most dramatic semiconductor-driven rallies in the country’s history with a margin-fueled unwind. More than 1.2 million retail accounts received margin calls, and 360,000 were forcibly liquidated, according to the source article.
The drop followed a stretch in which the Korea Composite Stock Price Index, or KOSPI, became heavily dependent on two names: Samsung Electronics and SK Hynix. Once that structure cracked, losses spread quickly across the broader market.
KOSPI more than doubled before the reversal
KOSPI finished 2025 at 4,214. By June 19, 2026, it had reached an intraday record of 9,385. The source says the move of more than 100% in less than six months exceeded gains seen during the dot-com era and the industrial boom of the 1980s.
Samsung Electronics and SK Hynix drove most of that advance. Together, they represented roughly 45% to 50% of KOSPI’s total market value and accounted for about 75% of the index’s gains for the year. SK Hynix had just reported a quarterly operating margin of 72%, which the article described as the highest ever recorded in semiconductor manufacturing. Goldman Sachs repeatedly raised its KOSPI target and eventually lifted it to 12,000, while forecasting 300% earnings growth for Korea in 2026.
That was the setup for what the article called a once-in-a-decade bull market. It also left the index unusually concentrated.
Record margin debt and leveraged products amplified the move
Retail investors were not simply buying the rally. They were borrowing to do it. The article links that behavior to local economic pressure, noting that an apartment in Seoul costs about 14 years of wages for an ordinary salaried worker. In that context, the stock market became, for many younger investors, one of the few perceived paths to upward mobility.
By June 24, margin balances had climbed to a record KRW 38.63 trillion, or about $25 billion. Most of that exposure was concentrated in Samsung Electronics and SK Hynix. Average leverage among retail investors stood at about 3x.
On May 27, 16 single-stock 2x leveraged ETFs tracking Samsung and SK Hynix were launched. The article says they sold out immediately. Put together, the market had two dominant stocks, billions of dollars in borrowed exposure, and another layer of leverage through ETF structures.
Four developments hit in close succession
Regulators signaled regret
On June 22, the head of Korea’s Financial Supervisory Service said publicly that he regretted approving the leveraged ETFs. The market reacted right away. The following day, some ETFs fell 25% in a single session, and KOSPI triggered a circuit breaker.
MSCI left Korea off the watch list
South Korea did not make MSCI’s developed-market watch list in June 2026. The article describes that as the only structural catalyst that had been drawing in large foreign inflows. Once that prospect disappeared, part of the bullish case went with it.
The July 13 sell-off
SK Hynix ADR began trading on Nasdaq on July 10. The listing raised $26.5 billion, was oversubscribed by seven times, opened at $170 versus an offer price of $149, and closed at $168.01.
Three days later, a broker report questioned whether SK Hynix could meet quarterly profit expectations. At the same time, investors who had already pushed the stock close to a threefold gain started taking profits aggressively. The Korea-listed shares were hit hard. On July 13, SK Hynix fell 15.37%, its worst one-day decline since listing and steeper than its 14.93% peak one-day drop during the 2008 financial crisis. Samsung Electronics fell 10.70%. KOSPI dropped 8.95% and triggered a marketwide halt of 20 minutes.
The article adds that Korea had already seen seven marketwide circuit breakers within a year, more than half of the 13 total triggers recorded since the mechanism was introduced in 2000.
Bank of Korea raised rates
Three days after the crash, on July 16, the Bank of Korea delivered its first rate hike in three and a half years, raising rates by 25 basis points to 2.75%. Inflation had reached 3.2%, well above the 2% target. The article cites rising oil prices and an income boom driven by semiconductor exports as the main reasons. All seven members of the monetary policy committee voted for the increase, and year-end rates were expected to reach 3%.
For a market already under pressure from forced liquidations, higher borrowing costs made the stress harder to absorb.
How margin calls turned into a liquidation spiral
Once prices began to fall, the mechanism became self-reinforcing. Falling prices triggered margin calls. Margin calls forced liquidations. Those liquidations pushed prices lower and set off a fresh round of margin calls. The article says the daily rebalancing rules built into 2x leveraged ETFs worsened the process by forcing additional selling into weakness.
More than 1.2 million accounts crossed margin-call thresholds, and 360,000 were forcibly liquidated. The forced-liquidation rate jumped from an average of 2.1% over the previous six months to more than 10%. Over two and a half months, total forced liquidations reached KRW 2.3 trillion.
The article also cites a screenshot posted by one investor showing a one-day loss of about KRW 2.1 billion, or roughly $1.4 million. That investor said he still planned to borrow more to keep buying.
Authorities tightened rules after the damage
Korea’s Financial Services Commission raised the minimum margin requirement from KRW 10 million to KRW 30 million, halted applications for new leveraged ETF listings, and required margin to be posted in cash rather than with stocks or bonds.
On July 14, four major economic agencies held an emergency joint meeting. The Financial Supervisory Service also acknowledged that some products had been approved too hastily, a statement the article describes as unusual coming from a financial regulator.
What the episode means for SK Hynix and SKHY
The article argues that SK Hynix’s operating fundamentals did not change during the collapse. It cites a 72% operating margin in the first quarter of 2026 and says market forecasts for second-quarter operating profit range from KRW 60 trillion to KRW 65 trillion, with another record still possible. Structural demand for high-bandwidth memory, or HBM, remains strong in the source material’s telling.
What broke, it says, was the leverage structure layered on top of those fundamentals. For U.S. investors holding SKHY on Nasdaq, the exposure is not tied to Korean margin-financing dynamics or the daily rebalancing pressure from leveraged ETFs. Their main risks are SK Hynix’s business performance and the U.S. dollar-Korean won exchange rate.
After the sell-off, KOSPI’s forward price-to-earnings ratio had fallen to about 6x, close to levels seen during the 2008 financial crisis. Whether that marks an opportunity or a value trap depends, in the article’s framing, on one core question: whether the AI memory demand cycle still has room to run, or peaks before leverage is fully cleared from the system.
Five warnings for investors
Leverage magnifies losses as easily as gains. Using the article’s example, a 27% drawdown with 3x leverage means an 81% loss before forced liquidation.
Concentration risk compounds quickly. If two stocks account for about 75% of an index’s gains, bad news in either one can become a marketwide event.
Forced liquidation does not wait for fundamentals. Once the cascade starts, liquidity drives pricing more than value does.
Regulatory approval does not mean a product suits retail investors. These ETFs were approved and listed, and looked little different from ordinary funds inside brokerage apps, yet regulators later said they regretted approving them.
Market tops often look like continuation. KOSPI kept making fresh highs through June, and there was no obvious signal on June 19 that the peak had been reached.
The source also says linear leverage has a built-in flaw: downside risk becomes hard to control once margin calls begin. It then introduces BIT Broker’s newly launched options trading function, stating that options are now connected with its cash equity ecosystem, that investors can use stock financing limits to buy options, and that first-time options trades or referrals can qualify for early-bird rewards.
The information in the original article was stated as current as of July 23, 2026. It also said past market performance does not guarantee future results and that the report was for general information only, not financial advice or a recommendation to buy or sell any security.