Huo Xing Finance reports that on August 2, according to Bloomberg, South Korea’s KOSPI index plummeted in July, inflicting heavy losses on a large number of retail investors. Despite a record 18% rebound on Friday, retail investors still posted a record net sell-off of KOSPI stocks that day; the index fell 22% for the month—the largest monthly decline since the global financial crisis—erasing approximately $3.9 trillion in market capitalization from South Korea’s stock market. Driven by President Lee Jae-myung’s push for stock market reforms and the listing of single-stock leveraged ETFs, Korean retail investors collectively bought approximately 78 trillion KRW ($54.2 billion) in KOSPI stocks from May to June. After the sharp market decline in July, many investors took to social media to blame the government. A 30-something investor in Seoul said he entered the Korean stock market for the first time in May and has now decided to “no longer invest in the Korean stock market.” Another investor, aged 40, borrowed 50 million KRW secured by his home to trade stocks and criticized the government for introducing leveraged ETFs, turning the market into a “casino.” In July, the KOSPI triggered circuit breakers and halted trading four times—a monthly record. Samsung Electronics and SK Hynix together account for over 50% of the KOSPI’s weight; their share prices fell 21% and 35%, respectively, in July. However, since early 2025, Samsung Electronics has risen more than fourfold, while SK Hynix has surged nearly tenfold. Analysts say this is a classic outcome of crowded trades amplified by leverage; deleveraging cannot be completed within days, and technology and semiconductor stocks may remain highly volatile over the coming months—but this should not be interpreted as a complete collapse of the AI investment thesis. The South Korean government suspended the listing of new single-stock leveraged ETFs in mid-July and pledged to introduce additional measures to stabilize the market and restrict retail participation in high-risk products. However, the head of the Korean Shareholders’ Alliance said public anger and criticism toward the government have reached their peak, with many investors viewing these measures as too little, too late.
South Korean retail investors blame the government for stock market volatility.
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Summary
South Korean retail investors are blaming the government for worsening market volatility, as the KOSPI index dropped 22% in July 2026. The Fear & Greed Index has sharply shifted toward fear, with Samsung Electronics and SK Hynix falling 21% and 35%, respectively. Despite an 18% rebound on August 2, selling pressure persisted. The government halted new single-stock leveraged ETFs in mid-July and pledged additional measures, but critics argue the response was too slow.
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