South Korea’s stock market volatility
TOPSHOT – Currency sellers monitor trade charges in a international trade dealing room on the Hana Bank headquarters in Seoul on February 2, 2026. South Korea’s benchmark index Kospi tumbled greater than 5 p.c on February 2, according to a sell-off throughout Asian markets amid contemporary considerations about an AI-fueled tech rally that has sparked fears of a bubble within the sector. (Photo by Jung Yeon-je / AFP through Getty Images)
Jung Yeon-je | Afp | Getty Images
South Korea’s stock market has swung wildly in latest days, underscoring how the world’s best-performing equities market final yr is popping into its most unstable one.
The benchmark Kospi index plunged as a lot as 12% on Wednesday, marking its largest single-day drop on document, earlier than staging a robust rebound within the subsequent session, up practically 10%, marking its finest day since 2008. It was buying and selling over 1% decrease on Friday.
The whipsaw comes as traders reassess dangers from the escalating battle within the Middle East, which has despatched oil costs surging and rattled markets globally, and the market’s focus in just a few shares.
While the worldwide risk-off temper has performed a serious function, consultants stated Korean market’s focus in two reminiscence giants and its sensitivity to power shocks has made it notably susceptible to sharp swings.
“Korea is a bit of an outlier, if you look at the other stock markets’ reaction,” stated Jason Hsu, chief government officer at Rayliant Global Advisors. He added that the Kospi’s heavy focus in a handful of know-how shares, meant that market strikes are usually magnified relative to extra diversified indices.
Performance of South Korean shares year-on-year
“It is natural its volatility is enormous,” he advised CNBC.
SK Hynix, is up practically 45% this yr, having skyrocketed 274% final yr. Similarly, Samsung Electronics, which is up about 60% because the begin of the yr, surged 125% in 2025.
Both make up about one-third of Kospi’s complete market capitalization as of early November, in response to a report from the Korea Capital Market Institute.
That focus tends to amplify volatility: when the reminiscence chip cycle is robust the index can rally quickly, however when traders take earnings or sentiment turns risk-off, declines in these few heavyweight shares can drag the complete market decrease, analysts stated.
The Kospi Volatility Index surged 27% to hit a document excessive on Wednesday on the top of the sell-off. It has since dipped to round 8% on Thursday, however stays at document excessive ranges.
Retail leverage amplifies swings
Another issue amplifying the market’s strikes is South Korea’s giant base of retail traders and its lively derivatives market, in response to market veterans.
“This is just too much of the leverage trading that’s affecting the market,” stated Daniel Yoo, international strategist at Yuanta Securities.
“We had a huge amount of margin calls for retail investors. So they just dumped it… And then [on Thursday] it went back up again. It has nothing to do with fundamentals.”
Retail traders have been among the many greatest patrons of Korean shares because the begin of the yr, typically utilizing margin accounts and through leveraged exchange-traded funds. That means sharp market drops can rapidly set off compelled promoting as margin calls hit, Yoo stated.
Individual traders had been the largest individuals in South Korea’s stock market on Thursday, in response to information from the Korea Exchange.
Individual merchants offered 19.7 trillion received ($13.3 billion) price of Kospi shares and purchased about 21 trillion received, making them the biggest patrons on the market and leaving them with internet purchases of roughly 1.3 trillion received.
Individual traders accounted for the biggest share of buying and selling on the Kospi on Thursday, making up about 45% of complete turnover, in contrast with roughly 33% for international traders and 22% for establishments, in response to Korea Exchange information on Thursday.
Adding to the turbulence is Korea’s sensitivity to power costs. As a big importer of crude oil, the nation is especially susceptible to disruptions in international provide.
“While we had seen sell-offs in major equity markets driven by the uncertainties around the Middle East, it has been more pronounced in South Korea [on Tuesday and Wednesday] given its relatively higher dependence on crude oil imports,” stated JPMorgan Asset Management’s international market strategist Raisah Rasid.
Semiconductor cycle nonetheless supportive
For now, the market’s choppiness might merely replicate the unwinding of an overheated rally, stated KB Securities’ Kim.
“Given the scale of leveraged position of Korean retail investors and the expected prolonged uncertainty from the Iran situation, it would be premature to call for an immediate V-shaped recovery,” he added.
But with semiconductor earnings nonetheless robust and valuations stabilizing, different market watchers imagine the underlying fundamentals of South Korea’s fairness market stay intact, notably within the semiconductor sector that dominates the index.
“The pullback appears to be knee-jerk and more sentiment-driven at this stage, rather than fundamentally driven,” stated Kieron Poon, funding director of Asian equities at Aberdeen Investments.
Memory costs, notably for Dynamic Random Access Memory (DRAM), have been rising after a robust 2025 and are anticipated to proceed rising by means of the primary half of 2026, supporting earnings for Korean chipmakers, he stated.
JPMorgan’s Rasid echoed that view, saying the long-term drivers for Korean equities stay robust.
“While there are concerns around demand destruction and inventory hoarding, demand-supply dynamics in the memory chips space is likely to remain tight through this year and possibly the next,” she stated.
