South Korea’s stock market has gone through a violent correction since July 2026, and investors who had piled into the AI supply chain are now nursing heavy losses. Some retail traders who used leveraged ETFs and margin financing are also facing forced liquidation pressure, according to BlockBeats on Aug. 8.
Market data showed the Korea Composite Index falling from a peak of 9,385.59 on June 19 to a low of 5,262.77 on July 29. The index lost nearly 44% in a little over a month.
Semiconductor leaders took the brunt of the sell-off
Large semiconductor names were hit especially hard during the pullback. SK Hynix dropped from a June 25 high of 2.987 million won to a July 29 low of 1.287 million won, for a maximum drawdown of about 57%. Samsung Electronics recorded a maximum decline of more than 49% over the same period.
As enthusiasm around AI memory trades intensified, South Korean retail investors had moved aggressively into semiconductor shares and leveraged ETFs. Some used 2x long products to chase SK Hynix and Samsung Electronics. Once the market reversed, leverage magnified the losses.
Leveraged product assets contracted sharply
Data from Shenwan Hongyuan showed that after South Korea launched 2x single-stock leveraged ETFs on May 27, capital tied to those products climbed quickly. That trend reversed during the tech stock correction, and product assets fell 71.6% from their peak.
South Korea’s outstanding margin financing balance has also dropped to about 27 trillion won, returning to levels seen at the beginning of 2026.
Falling prices and liquidations reinforced each other
Market participants said that when stock indexes fall quickly, margin accounts can hit maintenance requirements. If investors fail to add funds, forced liquidation is triggered. The selling pressure from those liquidations then pushes prices lower, creating a negative feedback loop of falling prices, margin calls, and more declines.
Some investors moved from triple-digit paper gains to steep losses in a short period. One investor used a 2x leveraged ETF to bet on SK Hynix and at one point had an unrealized gain of more than 100%, but ended up losing nearly 50% after the market turned in July. Another South Korean investor, heavily concentrated in SK Hynix, lost more than 60% in the account.
Regulators raised the bar for access
The report said the rally in South Korean AI stocks was driven not only by the semiconductor cycle, but also by aggressive retail leverage and a broad stock-trading boom. As the market cooled, regulators in South Korea raised the investment threshold for leveraged ETFs to reduce the risk of amplified volatility from leveraged trading.