KOSPI crashes 33% from record as Korean retail investors face brutal reversal

The KOSPI Composite Index plunged 10.76% on Tuesday, its steepest single-day drop since 1998, extending a 33% collapse from a record high set just six weeks ago. The benchmark closed at 6,042 points after triggering circuit breakers for the eighth time this year — more than half of the 14 total triggers in KOSPI history.

"The speed and magnitude of this decline have no modern precedent in Korean markets," said Lee Min-geun, an analyst at Korea Investment & Securities. "Extreme pessimism of this degree can itself be a contrarian signal."

The junior KOSDAQ index fell below 700 points for the first time since April 2025. Samsung Electronics has dropped 31% from its peak, while SK Hynix has lost 38%, dragging down an index where the two chipmakers account for more than 50% of market-cap weighting. Investor deposits fell to 105.6 trillion won from a May peak of 136.8 trillion won, while credit balances contracted to 32.7 trillion won from 38.6 trillion won. Forced liquidations totaled 9.97 trillion won in the month through July 24.

The collapse has erased roughly $800 billion in market value and shifted retail investor psychology from FOMO — fear of missing out — to JOMO, the joy of missing out. Online communities that buzzed with stories of friends buying luxury cars on stock profits now feature posts celebrating those who stayed out of the market.

Two catalysts, one crash

The selloff has been driven by twin shocks. First, reports that Nvidia-backed AI financing commitments had exceeded $750 billion raised concerns that infrastructure spending was outpacing future demand, triggering a global rotation out of semiconductor stocks. Second, news that a Chinese state-backed company had begun mass-producing immersion deep ultraviolet lithography machines intensified fears that Beijing's push for chip self-sufficiency would increase competition for equipment makers worldwide.

The KOSPI's structure magnified the damage. Samsung and SK Hynix together represent more than half the index by weight, meaning any selloff in memory chips becomes a market-wide rout. Korean leveraged ETFs, which reached $50 billion in net assets at the end of June — four times the U.S. level relative to market size — have exacerbated the downside through forced deleveraging, according to JPMorgan Chase analysts.

Contrarian signals emerge

Despite the carnage, some analysts see opportunity. Morgan Stanley's Joseph Moore called the selloff a buying opportunity, arguing that memory chip shortages will intensify in 2027 and 2028 and predicting third-quarter memory prices will rise at least 25% from the prior quarter. DS Securities raised its year-end KOSPI target to 9,000 points, saying the index is undervalued even under a worst-case 30% earnings decline scenario.

The broader Asian selloff was uneven. Japan's Nikkei 225 fell 4.3%, while Australia's ASX 200 rose 0.6% as gains in financial and energy stocks offset tech weakness. Hong Kong's Hang Seng Index edged 0.3% higher, supported by gains in JD.com and Alibaba, as investors bet Chinese chipmakers could gain market share from the DUV lithography breakthrough.

For Korean retail investors who rode the KOSPI from 4,000 to 9,000 and back, the psychological whiplash may be the hardest to recover from. "I heard a friend who was going to buy a Genesis now cannot even afford a used car," one 25-year-old who stayed out of the market told local media. "I am glad I never bought stocks — and I never will."

This article is for informational purposes only and does not constitute investment advice.