Bloomberg reported that South Korea’s KOSPI plunged in July, dealing heavy losses to a large number of retail investors. Even though the index posted a record 18% rebound on Friday, retail traders were still record net sellers of KOSPI stocks that day.
The KOSPI fell 22% over July, its biggest monthly drop since the global financial crisis. South Korea’s equity market is worth about $3.9 trillion.
Retail buying surged before the sell-off
Driven by President Lee Jae-myung’s push for stock market reforms and the launch of single-stock leveraged ETFs, Korean retail investors bought about 78 trillion won, or $54.2 billion, worth of KOSPI shares from May to June.
After the market tumbled in July, many investors on social media directed their criticism at the government.
Investors described losses and frustration
One Seoul investor in his 30s said he entered the Korean stock market for the first time in May and has now decided that he will “no longer invest in the Korean stock market.”
Another investor in his 40s said he borrowed 50 million won against his home to trade stocks and criticized the government for introducing leveraged ETFs, saying the move turned the market into a “casino.”
Circuit breakers and heavyweights amplified the slide
The KOSPI triggered circuit-breaker halts four times in July, a record for a single month.
Samsung Electronics and SK Hynix together account for more than 50% of the KOSPI’s weighting. Their shares fell 21% and 35%, respectively, in July. Even so, since the start of 2025, Samsung Electronics is still up more than fourfold and SK Hynix has risen close to tenfold.
Analysts pointed to crowded trades and leverage
Analysts said the sell-off was a typical result of crowded positioning combined with leverage. They said deleveraging is unlikely to be completed within a matter of days. Tech and semiconductor shares could remain highly volatile in the coming months, but the move should not be read as a full collapse of the AI investment thesis.
Government moved to halt new single-stock leveraged ETF listings
The South Korean government suspended new listings of single-stock leveraged ETFs in mid-July and said it would introduce more measures to stabilize the stock market and limit retail access to high-risk products.
Still, the head of the Korea Shareholders Alliance said retail anger and criticism toward the government had reached a peak, and many investors believe the measures came too late.