South Korea’s KOSPI extended its steep retreat on July 29, closing nearly 6% lower after falling as much as 13% during the session, as selling accelerated in AI and semiconductor-linked shares. The decline followed an almost 11% drop on July 28, leaving the benchmark down by roughly one-third over the previous month and nearly 38% below its June 22 peak.
The selloff has turned a market that had benefited heavily from enthusiasm around AI hardware into one of the most severe equity drawdowns among major technology-focused markets. SK Hynix and Samsung Electronics, the two companies most closely associated with South Korea’s role in the global memory-chip supply chain, led the decline.
SK Hynix fell more than 9% on July 29 and was down nearly 47% over the month, according to the market figures in the supplied material. Samsung Electronics dropped about 35% over the same period, breaking below its 100-day moving average and a longer-term rising trend line. Those technical breaches place further pressure on a market where the largest semiconductor companies carry substantial weight in the main index.
Chip shares drive the KOSPI’s deeper decline
The KOSPI had outperformed the Philadelphia Semiconductor Index during the earlier AI-led rally, reflecting the market’s exposure to high-bandwidth memory and other components used in data centers and advanced computing systems. Its reversal has now been sharper as well.
The supplied market data showed the Philadelphia Semiconductor Index, widely known as the SOX, falling below the 11,200 level. Yet the SOX remained about 20% above the level it would have reached had it matched the KOSPI’s decline from recent highs. That gap illustrates how concentrated South Korea’s market exposure is to a relatively narrow group of AI-linked industrial and technology companies.
Sharp drops in those shares can affect the KOSPI more directly than broad weakness in global technology indexes. Samsung Electronics is South Korea’s largest listed company, while SK Hynix has become a major beneficiary of demand for advanced memory chips used in AI servers. When both stocks fall at once, their combined index weight can magnify a broader retreat in local equities.
Technical indicators suggest the pace of the move has become extreme. The KOSPI’s relative strength index, or RSI, reached its lowest level since April 2025, according to the supplied data. RSI is a momentum measure that can flag when selling has been unusually persistent, though an oversold reading does not by itself establish that a market has found a bottom.
The index also moved below both its 50-day and 200-day moving averages and approached a longer-term support trend line associated with the previous upcycle. Such levels often draw attention from chart-focused traders, but their durability depends on whether selling pressure in the underlying shares begins to ease.
Leveraged products amplify the downturn
The impact has been especially severe for leveraged products tied to Korean equities. Direxion Daily South Korea Bull 3X Shares, which trades under the ticker KORU, fell from about $64 in June to around $14, a decline of roughly 78%, based on the figures provided.
KORU seeks daily investment results equal to 300% of the daily performance of its underlying benchmark before fees and expenses. That daily reset creates a structural risk during volatile declines: losses are magnified on down days, and subsequent gains must be earned from a substantially lower base. A recovery in the underlying index therefore does not necessarily produce an equivalent recovery in a leveraged fund.
The KORU decline has become part of the policy discussion in Seoul. Koo Yun-cheol, South Korea’s finance minister, apologized during a National Assembly session after lawmakers challenged the introduction of single-stock leveraged exchange-traded funds without what they described as sufficient review.
Lee Eog-weon, chair of the Financial Services Commission, said regulators were considering restricting access to such products to professional traders and were examining whether leverage multiples should be reduced. The discussion places products designed for short-term tactical trading under greater scrutiny after their losses moved far beyond the daily swings many retail participants may expect.
Officials stop short of market intervention
South Korean authorities have not announced an immediate move to deploy a stock-market stabilization fund. Kim Yong-beom, the presidential policy chief, said the government was monitoring financial markets but that conditions had not reached the threshold for activating the Stock Market Stabilization Fund.
That stance leaves the market focused on whether selling in heavyweight chip shares begins to stabilize without official intervention. The supplied material noted that the KOSPI volatility index showed only a limited reaction relative to the scale of the equity decline. A muted volatility response can complicate efforts to judge whether a broad capitulation event has occurred, particularly when index losses are driven by a concentrated group of large companies.
Crypto markets face a risk-sentiment test, not an automatic link
The KOSPI’s slide may raise caution across other risk-sensitive markets, including digital assets, because technology equities and cryptocurrencies can respond to common shifts in liquidity, leverage and appetite for volatile assets. The connection is less mechanical than claims of a fixed correlation would suggest.
Cryptocurrency prices trade continuously, draw participants from different regions, and can move on token-specific events, derivatives positioning, stablecoin flows or regulatory news. A fall in semiconductor shares therefore does not automatically translate into a matching move in Bitcoin, Ether, or smaller tokens.
The more immediate lesson from the Korean selloff lies in leverage. A sustained decline can erode leveraged positions faster than a simple index chart indicates, particularly when products reset exposure every day. Traders using borrowed funds or leveraged crypto derivatives face similar compounding risks when markets remain volatile for several sessions rather than making a single, easily reversible move.
With South Korea’s largest chip stocks still under pressure and policymakers reviewing leveraged products, the next test for the KOSPI will be whether selling broadens beyond AI-linked leaders or begins to narrow. That distinction would shape whether the episode remains a concentrated semiconductor unwind or develops into a deeper reassessment of risk across the Korean equity market.
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