KOSPI triggers another trading curb
South Korea’s stock market suffered another violent session on July 28, extending what PANews described as one of the most volatile years on record for the country’s capital markets. Just over seven months into 2026, the market has already hit its circuit breaker mechanism eight times.
The KOSPI fell more than 11% intraday and triggered a trading curb. It was also the first time since April 14 that the index dropped below 6,000. From its June peak, the benchmark is now down more than 35%.
This was the eighth circuit breaker event for South Korean equities this year. PANews said the two halts in March were driven mainly by escalating geopolitical tensions in the Middle East and a broader flight to safety, while the six dislocations since June have exposed structural risks inside the Korean market itself. A sharp correction in semiconductor stocks has been at the center of that pressure.
AI trade unwinds as chip giants lose ground
The rally that pushed South Korean equities higher was fueled largely by enthusiasm around AI. The market is now dealing with the downside of that same trade as investors reassess the durability of AI capital spending, the room for further growth in high-end memory demand, and possible changes in future supply pressure.
Samsung Electronics and SK Hynix have been hit first and hardest. According to the report, the two companies at one point accounted for more than 60% of the KOSPI’s weighting, driving much of the earlier advance and helping position South Korea as one of the world’s strongest-performing markets. That concentration also left the market unusually exposed.
Over the past month, Samsung Electronics has fallen about 31.2%, while SK Hynix has dropped more than 14.8%. PANews also said SK Hynix American depositary receipts fell below their issue price less than a month after listing.
The report summed up the market’s predicament in simple terms: semiconductors powered the rise, and semiconductors are now driving the decline.
SKHX perpetual on Hyperliquid plunges 17.9%
The turbulence in spot equities spilled into onchain derivatives. HyperInsight data cited by PANews showed that at 7 a.m. Beijing time, the SKHX perpetual contract on Hyperliquid suddenly dropped from $1,128.2 to $927, a 17.9% slide in a short span that liquidated a large number of high-leverage long positions.
The contract’s open interest, measured by notional value, fell from about $508 million to $388 million. Long liquidations over four hours approached $80 million, exceeding the figure recorded on Binance over the same period.
PANews said the immediate trigger was an abnormal order worth only about $867 in the premarket session on South Korea’s NXT market. Because liquidity was thin before the main session opened, that small order, while compliant with trading rules, became an important external price input and was then adopted by the Trade.XYZ oracle system.
Hyperliquid’s mark price for the SK Hynix perpetual adjusted in response. In a highly leveraged derivatives market, even a brief deviation in mark price can force large-scale liquidations. As long positions were closed out, the resulting selling pressure amplified the move and turned it into a chain reaction.
Binance was affected to a lesser extent. Before Korea’s main market opened, Binance was still relying primarily on its internal pricing mechanism and did not immediately switch to an external quote, which helped it avoid liquidations on the same scale. Even so, arbitrage activity across venues still pushed the SK Hynix perpetual lower there as well.
PANews said the episode was not a case of market manipulation. Instead, it was the product of thin liquidity, external price feeds and high leverage interacting at once. In a mature spot market, a trade worth less than $1,000 would usually have little impact. In an onchain derivatives market that depends on external price inputs, the same trade can affect the mark price through an oracle and then cascade through leveraged positions.
Hyperliquid says Trade.xyz is investigating
After the move, Hyperliquid said the SKHYNIX perpetual market was deployed and operated by the Trade.xyz team. It added that the team is investigating the cause and will share an update after its analysis is complete.
Hyperliquid also explained how pricing works under the HIP-3 market structure. The deployer is responsible for pushing the market’s mark price, oracle input and external price data, and can use a mark price method similar to the one used for validator-run perpetuals. Under that setup, the protocol contributes one of three median components, while the deployer supplies the other two and can influence the final mark price.
The example given by Hyperliquid was straightforward: if the median of the latest onchain trade, best bid and best ask is 100, while the deployer pushes 150 and 151, the final mark price becomes 150.
The liquidation chain triggered by a very small trade has renewed focus on several long-running issues in onchain derivatives: the stability of price sources, oracle design and the strength of liquidation safeguards during extreme volatility.
Regulators move to tighten leverage rules
South Korea’s market turmoil has also turned into a confidence problem, and regulators are moving in. PANews said retail leverage, long popular in the local market, has been a major amplifier of the current volatility.
Based on previously disclosed official data, cumulative forced liquidations in July had reached KRW 344.2 billion as of July 13. More than 1.2 million leveraged retail accounts had hit margin call thresholds, and roughly 320,000 to 360,000 of those accounts had already been forcibly liquidated by brokerages. Some investors were left owing money to their brokers.
Political pressure is building as well. People Power Party lawmaker Kim Eun-hye is discussing whether to file a state compensation lawsuit over investor losses. Another lawmaker from the same party, Na Kyung-won, has publicly called for a full investigation into public losses and for active consideration of state compensation. She also proposed using a parliamentary probe and special investigation to examine what she described as a rushed introduction by the Blue House and financial authorities.
At the regulatory level, the Financial Services Commission, or FSC, has begun tightening oversight of single-stock leveraged products. Under the new rules, starting July 31, 2026, the minimum base margin for ordinary individual investors in such products will rise from KRW 10 million to KRW 30 million. The FSC will also refine margin calculation rules in an effort to reduce the impact of momentum-driven retail leverage on the market. Regulators said the threshold could be raised further in the future, and personal investment caps may also be introduced.
Foreign capital exits as Koreans buy U.S. stocks
The pressure is not limited to leveraged ETFs. PANews said fear of missing out has driven many retail investors to borrow for stock purchases, amplifying risk across the system. During the rally, large numbers of investors used loans to chase equity returns, and Korean banks at one point faced strain on lending capacity around midyear. At the same time, some borrowers with weaker credit profiles turned to illegal private lending. The number of people in that category rose from 59,000 last year to 119,000.
To contain financial risk, Korean banks have recently tightened unsecured loan policies. Financial regulators are also considering limits on the use of borrowed money for high-risk financial products, including a rule that would allow no more than 20% of invested funds to be used for leveraged products tied to a single stock.
Foreign investors have been heading for the exit too. A recent South Korea equity strategy report from JPMorgan, cited by PANews, said net foreign outflows from the Korean stock market this year have exceeded $110 billion, the largest on record for a single Asian market. About 90% of that outflow was concentrated in Samsung Electronics and SK Hynix.
Falling confidence has also pushed Korean investors back into overseas markets. The Seoul Economic Daily reported that net buying of U.S. equities by Korean investors topped KRW 5 trillion this month. Data from Seibro, the securities information portal run by the Korea Securities Depository, showed that from the first to the 27th of the month, domestic Korean investors made net purchases of nearly $3.59 billion in U.S. stocks, about 5.5 times the net buying recorded in all of June. Most of that money went into semiconductor and technology shares.
What was once a global standout market riding the AI cycle is now dealing with repeated trading curbs, leveraged washouts and foreign capital flight. PANews said South Korean equities are going through a harsh repricing.