Korean Stock Market AI Bull Run Retreats, Leveraged Investors Face Massive Withdrawals

On August 8, the South Korean stock market has experienced severe adjustments since July 2026, as investors betting on the AI industry chain faced significant losses, with some individual investors using leveraged ETFs and margin trading facing forced liquidation pressures.

Data shows that the KOSPI index fell from a high of 9,385.59 points on June 19 to a low of 5,262.77 points on July 29, a decline of nearly 44% over more than a month. Semiconductor leaders became the hardest hit, with SK Hynix's stock price dropping from a peak of 2,987,000 KRW on June 25 to a low of 1,287,000 KRW on July 29, a maximum drawdown of about 57%; Samsung Electronics saw a maximum decline of over 49% during the same period.

As the AI storage market heated up, many South Korean individual investors flocked to semiconductor stocks and leveraged ETFs. Some investors chased after SK Hynix and Samsung Electronics using 2x leveraged products, but after the market reversed, the leverage effect amplified their losses.

Since the introduction of individual stock 2x leveraged ETFs in South Korea on May 27, the scale of related leveraged funds once grew rapidly, but subsequently shrank significantly due to the adjustment of tech stocks, with product scale retracting by 71.6% from its peak. The balance of credit financing in South Korea also fell back to about 27 trillion KRW, returning to levels seen in early 2026.

Market participants pointed out that when the stock index falls rapidly, if financing accounts hit the margin call line and investors are unable to replenish funds, it will trigger forced liquidation, further pressuring stock prices and creating a negative feedback loop of "decline---liquidation---continued decline."

Some investors have experienced a transformation from doubling profits to incurring huge losses. One investor had bet on SK Hynix through a 2x leveraged ETF, with account floating profits exceeding 100%, but after the market reversal in July, ultimately lost nearly 50%. Another South Korean investor, heavily invested in SK Hynix, saw account losses exceeding 60%.

Analysts believe that the current AI stock market in South Korea is driven not only by the semiconductor boom cycle but also by high leverage participation from individual investors and a nationwide stock trading frenzy. As the market cools down, South Korean regulatory authorities have raised the investment threshold for leveraged ETFs to reduce the risks of leveraged trading amplifying market volatility.