South Korea’s stock market has taken a sharp turn. After a record rally early in the year, the Kospi has become the worst performing major global index since the start of October.
The main driver was a selloff in semiconductor giants that had long powered the market on expectations of an artificial intelligence boom.
According to the Korea Exchange and Yonhap Infomax, the Kospi fell 17.11% between October 1 and Friday. It was followed by Indonesia’s IDX Composite at 14.59%, China’s Shenzhen Composite at 7.4%, and Korea’s tech focused Kosdaq at 7.14%. Nearly seven in ten stocks listed on the Korea Exchange closed the period lower. On the Kospi, 652 stocks declined. On the Kosdaq, the figure was 1,247.
The picture looked quite unfamiliar only recently. Except for March and July, the Kospi ranked among the strongest major global indexes for much of the year. In April alone it surged 30.61%. The rally broke in July, when the index plunged 22.19% and the Kosdaq dropped 21.44%. August and September brought only a weak recovery of 3.4% and 0.26%. In October the decline accelerated.
Samsung Electronics and SK Hynix led the slide. From the start of October, the former fell 19.74% and the latter 28.38%. Both companies carry heavy weight in the index and for a long time supported gains on strong demand for memory used in AI systems. When global investors began to question the returns on large-scale AI infrastructure spending, the Korean heavyweights were hit first. Additional pressure came from expectations of higher US interest rates and intensifying competition from Chinese memory producers.
The market drop is affecting more than just share prices. It is also weighing on consumer behavior. In the first half of the year households poured money into equities. Bank of Korea data show that in the second quarter households and nonprofit organizations invested 101.6 trillion won in stocks and investment funds, up more than 40 trillion won from the first quarter. Much of that capital is now locked in shares that have fallen sharply.
Retail sales are already softening. After rising 0.1% in May and 2.7% in June, they fell 2.6% in July and another 1.8% in August. Economists note that the Korean economy is already polarized, and domestic demand has been weak. A stock market downturn risks putting further pressure on spending. Investors who bought shares with borrowed money are especially exposed.
Against the backdrop of market stress and rising demand for psychological support, President Lee Jae Myung issued a direct appeal. In a social media post he wrote:
“We must live. No matter what, you must live. If things are difficult, please call 109. They will help you find a real path and reasons to keep living.”
The number 109 is the government’s round the clock suicide prevention and counselling hotline. The message came as some investors reported worsening emotional strain and as the consequences of the market’s sharp reversal were widely discussed.
Similar pressures can be seen elsewhere. We previously reported how rising yields and fiscal risks in France are weighing on banks and related financial firms. In both cases macroeconomic and political uncertainty is quickly feeding through to the cost of capital and investor behavior.
