Asian stock markets experienced a massive shock, collectively losing more than $600 billion in market capitalization. The main catalysts were a plunge in chipmaker stocks and a tightening of monetary policy in South Korea. This is not just a correction — it is a systemic shift that has affected all key exchanges in the region.
South Korea under pressure: KOSPI loses $261 billion
The situation was most dramatic in Seoul. The KOSPI index collapsed by 6.37%, leading to the evaporation of 388.6 trillion won (approximately $261 billion). This is the deepest decline among Asian markets. Intraday losses reached 7.6%, but some of the losses were recovered by the close.
Technology giants were particularly hard hit. Samsung shares fell by 8.2%, and SK Hynix by 11.6%. Notably, this is the eighth time this year that the exchange circuit breaker has been triggered — a record since 2000. This indicates extreme volatility and investor nervousness.
Japan and China: scale of losses
Japan's Nikkei fell by 2.79%, losing 35.1 trillion yen (approximately $209 billion). China's SSE dropped by 2.2%, wiping out 630 billion yuan ($123 billion). Taiwan's market lost 1.2 trillion Taiwanese dollars (approximately $40 billion), declining by 1%.
Root of the problem: leverage and ETFs
The catalyst for the sell-off was the collapse of US memory chipmaker stocks, which quickly spread to Asia. However, the key factor exacerbating the crisis in Korea is the boom in leveraged products. Leveraged ETFs on Samsung and SK Hynix, launched in May, have fallen by approximately 40% over two months, despite their total assets exceeding $10 billion in June. Currently, such instruments account for more than 70% of trading volume on the Korean market, which stands at $4.1 trillion, compared to about 30% before their introduction.
The regulator, the Financial Services Commission, is preparing emergency measures: raising the minimum deposit threshold from 10 million won (~$6,735) and transitioning to intraday rebalancing. This comes amid a record outflow of foreign capital of $110 billion and hundreds of thousands of forcibly closed retail investor accounts.
My analysis: The situation resembles a classic leverage "bubble." Retail investors, chasing super-high returns, have created an extremely vulnerable structure. Now that the market has turned, the domino effect could affect not only Korea but also other Asian markets. In the short term, we should expect either strict regulatory measures or further liquidity contraction.