South Korea’s benchmark KOSPI index plunged 9.99% to 8,203.84 on June 23, marking its sharpest one-day fall in nearly two decades and triggering a trading halt, as semiconductor weakness, leveraged ETF risks, and pre-earnings positioning converged to drive a broad sell-off.
Samsung Electronics and SK Hynix led losses, dropping 12.31% and 12.47% respectively and accounting for about 71% of the index decline. The shock spread globally, with Nasdaq 100 futures falling 3.01%, the Philadelphia Semiconductor Index down 7.7%, and Japan’s Nikkei 225 losing 3.55%. Major chip names including Taiwan Semiconductor, Micron, AMD, Intel, Applied Materials, ARM, and ASML each fell more than 7%. Leveraged ETFs amplified the move, with triple-leveraged Korea funds down 32% and semiconductor ETFs off 17%.
The scale of the drop places it among the five largest daily declines in Korea’s market history, comparable to the sell-off seen during the 2008 financial crisis, despite a backdrop in 2026 that had been supported by solid growth and strong AI-driven momentum.
What triggered the sell-off
The decline was driven by three catalysts within a 24-hour window.
First, local reports indicated SK Hynix would slow expansion of high-bandwidth memory (HBM4) production to prioritize conventional DRAM. Because HBM is critical for AI chips, the move raised concerns about near-term AI supply expectations. SK Hynix and Samsung are the only large-scale global suppliers of this technology.
Second, traders reduced exposure ahead of Micron’s earnings release. Micron shares had surged more than 300% this year on AI-related optimism, creating conditions for profit-taking in a high-valuation environment.
Third, comments from Financial Supervisory Service Governor Lee Chan-jin warning about risks tied to single-stock leveraged ETFs tracking Samsung and SK Hynix heightened concerns about structural vulnerabilities, accelerating the sell-off.
Structural pressure magnified losses
Korea’s market structure intensified the decline. High levels of retail margin financing, combined with large exposure to single-name leveraged ETFs and pension fund selling, increased downside pressure.
Retail margin balances had reached record highs prior to the drop, turning a source of liquidity into a point of fragility. Leveraged ETFs, which require daily rebalancing, added automatic selling pressure as prices fell.
Local leveraged ETFs held about $9.1 billion in assets, while offshore products brought total exposure to around $30 billion. Approximately 92% of local participation came from retail traders. Regulators are now reviewing measures including product size limits, qualification requirements, and improved price stabilization mechanisms.
Meanwhile, the National Pension Service sold roughly $1 billion in KOSPI shares in the six days leading up to the decline and $1.5 billion for the month, marking its largest reduction since April 2021. This shift removed a key stabilizing force from the market.
Rebound follows historic drop
The KOSPI partially rebounded on June 24, rising 1.86% at the open to 8,356.79 as traders moved to buy beaten-down stocks. Samsung Electronics gained 6.29% and SK Hynix rose 3.72% in early trading.
The recovery came despite continued weakness in U.S. semiconductor stocks, where Micron fell 13.18% overnight and the Philadelphia Semiconductor Index dropped 7.87%.
SK Hynix strategy reassessed
Initial fears around SK Hynix’s HBM4 decision are being reassessed. Industry analysis suggests the company is shifting capacity toward DDR5 memory to capitalize on tight supply and stronger near-term margins rather than signaling weakening AI demand.
Some estimates suggest DRAM margins could reach as high as 90% this year, potentially exceeding HBM profitability in the short term. The move is increasingly viewed as a tactical adjustment rather than a structural shift away from AI.
Focus turns to Micron earnings
Attention is now centered on Micron’s earnings, seen as a key test for AI hardware demand. Market expectations are high, with forecasts pointing to revenue of about $35.5 billion, up more than 275% year over year, and a near 1,000% surge in earnings per share.
Demand signals remain strong, with Micron reportedly having already sold out its entire 2026 HBM production capacity under contract.
Market fragility exposed
Analysts describe the sell-off as a case of liquidity exhaustion rather than a collapse in fundamentals. While long-term AI demand remains intact, the episode highlights how quickly price movements can accelerate when positioning is crowded and leverage is elevated.
The sharp reversal underscores a key risk: when large segments of the market are aligned around the same theme, even small shifts in narrative can trigger outsized and rapid declines.
For deeper insight into volatility drivers and risk signals, explore our guide on crypto crash preparation and navigation.
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