BlockBeats news, on August 4, Bloomberg columnist Shuli Ren stated that the core issue facing South Korea's stock market is not deteriorating corporate fundamentals, but rather that market structure, regulatory policies, and investor confidence are being undermined.
Reports indicate that this year, South Korea’s stock market一度 became one of the world’s hottest yet most volatile markets, with the KOSPI plunging nearly 40% in just 27 trading days. Despite Samsung Electronics and SK Hynix continuing to benefit from AI chip demand, and the market’s forward P/E ratio for the next 12 months falling to around 5.5x, investors may still choose to avoid the South Korean market.
Ren pointed out that one major reason for the abnormal volatility in the Korean stock market is that regulators previously approved single-stock leveraged ETF products. Since leveraged ETFs require mechanical rebalancing based on market movements—buying more as prices rise and selling as prices fall—they further amplify market volatility.
According to Goldman Sachs data, during the peak of the KOSPI in June this year, a 5% price fluctuation in SK Hynix could result in leverage ETF rebalancing flows accounting for up to 40% of the stock’s average daily trading volume.
In addition, the plunge severely impacted South Korean retail investors. Data shows that the most popular SK Hynix leveraged ETF fell as much as 84% from its June high, triggering forced liquidations in approximately 360,000 accounts, 62% of which were held by individuals under the age of 35.
Ren believes that the South Korean government’s earlier efforts to reform the capital markets and attract retail investment have undermined young investors’ confidence in the domestic market, as it failed to adequately control leverage risks during the AI trading boom.
She stated that the current issue with Korea's stock market is not a lack of AI growth opportunities, but rather concerns over market rules, regulatory credibility, and trading stability. If high volatility persists, global capital may choose to bypass Korea’s stock market, even as the AI industry continues to thrive.