Song Mi-kyung pocketed a profit of about Won300mn ($200,000) earlier this year as South Korea’s stock market surged on the AI boom.
The 60-year-old Seoul resident has now found out the hard way that stocks can go down as well as up after a wild week on the Kospi. Her portfolio now shows a paper loss of more than 60 per cent as the index heads for a record monthly loss, down nearly 40 per cent from its June peak.
“The losses are ballooning day by day. I am really stressed out. I don’t know what to do about it,” she said. “I’ve never seen such rapid falls, not even during the Asian financial crisis. I’m about to give back all the gains I’ve made this year.”
Song is among tens of millions of South Korean retail investors caught in this week’s tech sell-off after piling into one of the world’s best performing stock markets to cash in on booming global demand for memory chips.
After a blistering rally this year led by Samsung Electronics and SK Hynix, which account for nearly half the Kospi, the index shed about 16 per cent in just two days to its lowest level since early April following a savage sell-off for both companies. Nevertheless, Samsung and SK are still up about 70 per cent and 112 per cent respectively this year.
Retail investors became the Korean market’s biggest buyers this year after missing out on a 75 per cent rally in 2025. Many used margin loans and leveraged exchange traded funds to increase exposure to technology shares.
The brokerage Korea Investment & Securities said on Wednesday that nearly half of its 880,000 clients who bought Samsung shares were now sitting on losses, while nearly 70 per cent of its 408,000 investors in SK Hynix were also in the red.
The number of active individual stock trading accounts in Korea has neared 110mn — the equivalent of about two for every citizen.
“The unwinding of leveraged ETFs tracking the volatile semiconductor sector is sending shockwaves through the market, with many retail investors seeing their principal nearly wiped out,” said Namuh Rhee, chair of the Korean Corporate Governance Forum, an advocacy group for small shareholder rights.
“The market seems to be nearing a selling climax, with retail deleveraging almost complete and widespread forced liquidation of stock holdings.”
Deposits held at retail brokerages, reserved for stock purchases, have fallen to Won107tn ($74bn), down from a June peak of Won139.7tn, according to the Korea Financial Investment Association.
Margin debt, which hit a record Won38.6tn ($27bn) last month as investors borrowed to amplify bets, has dropped to Won33.2tn after a wave of forced liquidations during the recent rout.
Part of the problem was regulators’ decision in late May to approve 16 single-stock leveraged ETFs tracking Samsung and SK Hynix, which have been blamed for amplifying moves in indices and individual stocks. Most of these products have fallen more than 60 per cent since their debut.
“The leveraged funds became a trigger when the market was already due for profit-taking,” said Jongmin Shim, an equity analyst at CLSA.
Following an emergency meeting on Wednesday night, Korea’s finance ministry said it would limit access to leveraged ETFs. The finance minister, central bank chief and financial regulators said in a statement that investment in the funds had been “amplifying market volatility”.
Meanwhile, the Bank of Korea has also warned of rising risks from household debt, while lawmaker Ahn Cheol-soo submitted a bill to exempt lossmaking retail investors from stock transaction taxes.
Many people had rushed into equities as the Kospi more than doubled this year, putting it on track to become the world’s best-performing major index for a second year. President Lee Jae Myung had encouraged the shift as part of efforts to steer household wealth away from the overheated property market.
“The market was doing so well until recently, drawing many amateur investors into stocks this year,” said Ha Seok-keun, chief investment officer at Eugene Asset Management. “That’s why the damage is greater for retail investors.”
Brokerage chat rooms have filled with retail investors lamenting losses of 70 to 80 per cent from ETFs. “When can I get out of this hell?” asked one investor in Tiger SK Hynix Leverage ETF after his holding sank by 65 per cent. “My life’s screwed. I don’t think there’s any way out,” wrote another.
Young Koreans who embraced the high-risk products have been hit especially hard as home ownership has become out of reach for many young Koreans.
“Leveraged ETFs came to be seen as a quick, easy way for them to make money,” said Ha.
Shim said retail investors were suffering “unprecedented” losses because many entered the market after stocks had already risen sharply.
“The market is headed into its worst phase, where fundamentals no longer matter. It seems to have lost its price-discovery mechanism,” he said. “The vicious cycle is likely to continue for the time being as institutional investors avoid volatility and retail investors pull money out in fear.”
Analysts expect any recovery to be slow, with extreme volatility discouraging institutions from taking large positions, while retail investors remain traumatised by recent losses.
“In just over a month, their fortunes have reversed rapidly. Many are fleeing the market, frightened by huge losses and exhausted by volatility,” said Ha. “The rapid and deep correction is damaging their mental health as well as their stock accounts.”
A modest recovery on Thursday is unlikely to assuage troubled investors. The Kospi rose about 3 per cent and Samsung Electronics gained more than 6 per cent after posting record results for the second quarter, reflecting the extraordinary profitability of Samsung’s AI-driven semiconductor business.
Revenue jumped 130 per cent to Won171tn ($119bn) compared with the same period last year, while operating profit surged about 1,800 per cent to Won89.5tn ($62bn), in line with expectations.
Additional reporting by Daniel Tudor in Seoul
