Panic on KOSPI: Index plunges 30% from peak — semiconductor bubble bursts
The South Korean stock market is experiencing a devastating crash. The KOSPI index has lost over 30% from its June peak, and the main reason is the bursting of a bubble in the chip manufacturing sector. This is not just a correction, but a full-blown crisis that is hitting the country's most capitalized companies.
On Monday, after a holiday break, the KOSPI fell another 4.5%, firmly settling in deep bear territory. The trading session was one of the most dramatic in recent years.
Chip Giants Under Fire
The biggest losses were suffered by technology heavyweights. Samsung shares fell by 4.3%, and SK Hynix by 4.2%. Together, these two companies account for about 60% of the total KOSPI capitalization, so their decline drags the entire index down.
The trigger for the new wave of sell-offs was another AI product. The Kimi K3 model from Moonshot AI once again raised doubts about the feasibility of giant investments in AI infrastructure, repeating the effect of DeepSeek, which already shook markets in early 2025. Investors are frantically reassessing their valuations, fearing that the bubble of overheated expectations around artificial intelligence is beginning to burst.
Collapse of Leveraged ETFs and Record Volatility
Leveraged products were hit particularly hard. The largest double-leveraged ETF in Korea tracking SK Hynix's rise collapsed by about 70% from its June peak and 50% from its launch point. American depositary receipts of SK Hynix also lost about 10% from their opening price on July 10.
Retail investors, who poured 14 trillion won ($9.4 billion) into these ETFs since May 27, found themselves trapped. Many are now suffering colossal losses.
The scale of the turmoil is confirmed by record statistics on exchange circuit breakers. In 2026, the Korea Exchange has already activated over 35 sidecars (temporary halts in program trading of futures) and 7 exchange circuit breakers (full trading halts during a sharp index decline). For comparison, during the entire crisis year of 2008, only 26 sidecars were activated. The current figure has been exceeded in less than seven months.
The KOSPI volatility index has risen above 2008 levels, making current trading the most turbulent in market history. In a single day, the index plunged 5%, wiping out 260 trillion won (about $176 billion) in market capitalization and triggering yet another sell-sidecar.
My Analysis
The situation in the Korean market is a classic example of how overheating in one sector (semiconductors) leads to a systemic crisis. The AI expectations bubble, which has been inflating for the past two years, is now bursting with tremendous force. For the crypto market, this is an alarming signal: if traditional stock markets continue to fall, we could see a wave of liquidations in digital assets as well, as institutional players will be forced to seek liquidity wherever they can.