South Korea's KOSPI plunges into bear market amid leveraged ETF turmoil

South Korea’s benchmark KOSPI index has entered a bear market, slipping about 25% from its late‑June record high of 9,114 points. The decline follows a dramatic 8.95% drop on July 13 that triggered the exchange’s 20‑minute circuit‑breaker and a temporary trading halt. Semiconductor giants Samsung Electronics and SK Hynix, which together account for more than half of the index’s market value, have seen their share prices plunge, with SK Hynix falling as much as 15% on a single day.

The market’s volatility has been amplified by a wave of single‑stock leveraged exchange‑traded funds (LETFs) that track these chipmakers. Launched in late May, more than a dozen such ETFs have lost up to half their value, prompting calls from financial watchdogs for stronger investor‑protection rules. Regulators, including the Financial Supervisory Service and the Bank of Korea, are monitoring the products and may investigate aggressive marketing.

Foreign investors have sold nearly $110 billion of South Korean equities this year, leaving domestic retail investors to shoulder much of the buying burden. Despite the sharp correction, the KOSPI remains the world’s best‑performing major index in 2026, up roughly 60% year‑to‑date, driven by an AI‑fuelled rally in the semiconductor sector.