Seoul Market Crash: Down 30%, 360,000 Wiped Out
Average share value on the Seoul exchange fell nearly 30 percent in a month, with the KOSPI index sliding from over 9,100 to 6,615 points. Around 360,000 retail investors lost their entire stake.
- The KOSPI index fell from over 9,100 to 6,615 points, nearly 30 percent in a month.
- The steepest single-day drop came on June 23: minus 10 percent in one session.
- Brokers liquidated the accounts of 1.2 million clients, and around 360,000 investors were wiped out entirely.
- Total losses are estimated at 3.45 trillion won (about $2.3 billion).
The KOSPI index on the Seoul exchange fell from over 9,100 to 6,615 points by July 20, a loss of nearly 30 percent in a little over a month. The sharpest single-day drop came on June 23, when the market shed 10 percent in one session. It is the most severe correction on Asian exchanges this decade, and analysts are describing it as the first major bursting of the artificial intelligence bubble.
The preceding rally had been driven by two companies: Samsung Electronics and SK Hynix, makers of memory chips for AI data centers. At the peak they accounted for 56 percent of the index, so their correction dragged the entire KOSPI down with them. The selloff began once institutional investors started questioning the returns on capital spending in artificial intelligence, and as cheaper Chinese competition emerged in chip manufacturing.
Why did Seoul fall first?
The South Korean market was the most exposed because it is tightly bound to two names in the semiconductor sector. When margins begin to erode in an industry whose prices are set on expected rather than realized returns, concentration turns into risk. Investors had paid a premium for future growth that did not materialize fast enough to justify the valuations.
Unlike markets such as the United States, where share ownership is spread across pension funds, retail investors dominate in South Korea. Around 14 million citizens, more than 27 percent of the population, actively trade stocks, often on borrowed money. When the index began to fall sharply, margin calls kicked in: brokers closed out positions of clients who could not top up their collateral. According to market data, the accounts of 1.2 million clients were liquidated, and around 360,000 investors lost their stake entirely. Their losses are estimated at 3.45 trillion won (about $2.3 billion).
Does the same scenario threaten the US and Japan?
Economists warn that the American and Japanese markets are inflated by the same expectations of artificial intelligence. The valuations of leading tech companies rest largely on the projection that AI infrastructure spending will eventually deliver returns that are, for now, not visible in revenue. Seoul, as the most concentrated market, is the first domino, but the logic of overvaluation is not confined to Asia.
The story reaches investors closer to home as well. A growing number of citizens in Serbia have in recent years bought stakes in global tech funds through brokerage apps, exposed to precisely the same stocks that pulled the KOSPI down. Unlike the Korean retail trader who buys on margin, the local investor mostly commits personal savings, yet concentration in a handful of tech names carries the same risk of a sudden correction.
In the short term, the question is whether central banks and regulators will step in to calm the market or let the correction run to the bottom. In the long term, the fall in Seoul is a test of the thesis that AI investment must, within a reasonable horizon, begin to return what has been spent. Is your tech portfolio diversified enough to withstand the kind of correction Seoul has just endured?
