South Korea's KOSPI index experienced severe losses, falling more than 8% in a single trading session and triggering a 20-minute halt. The index closed at 5,554, down 7.6% on the day, marking the seventh consecutive daily loss. Intraday, the index declined as much as 9.3%, activating its 10th circuit breaker of the year.
Since reaching its June peak, the KOSPI has declined more than 40%, erasing approximately $2 trillion in market capitalization. This loss exceeds South Korea's entire annual economic output of about $1.9 trillion. The decline has pushed South Korea's stock market from sixth place to 10th among the world's largest stock exchanges by capitalization.
The sharp selloff has particularly impacted South Korea's retirement savings. The National Pension Service, the world's third-largest retirement fund with approximately $1.3 trillion in assets, has seen its holdings shrink alongside the broader market decline.
Concentration in Tech Stocks
Samsung Electronics and SK Hynix, both artificial intelligence chip manufacturers, represent roughly half of the KOSPI's total market capitalization. Their underperformance in recent months has accounted for approximately 70% of the index's total decline since June.
July marked the KOSPI's worst month since the 2008 Global Financial Crisis. October is already approaching the full extent of July's losses and could potentially perform worse.
Market Volatility and Circuit Breakers
South Korean media designated the trading day as "Black Thursday." The current drawdown is approaching the median decline of 43.7% recorded during previous market crises including Black Monday in 1987, the Asian financial crisis of 1997, the dot-com crash of 2000, and the 2008 Global Financial Crisis.
Retail investors have amplified market volatility through the use of leveraged single-stock exchange-traded funds. South Korea's finance minister apologized for introducing these products.
Goldman Sachs compared the current month's selloff to two prior episodes with similarly severe declines and no rebound day: March 2020 and August 2011.
Government Response
South Korea's Financial Services Commission chairman convened an emergency meeting and instructed financial services firms to maintain vigilance and actively respond to ensure financial market stability and investor protection.
