July's record KOSPI plunge and brief historic rebound exposed how leveraged retail bets in Samsung Electronics and SK Hynix amplified volatility, while the shock may also drain capital from South Korea's crypto market.
South Korean brokerages turned more cautious in July, issuing 580 target-price downgrade reports against 351 upgrades, the first month this year that cuts outnumbered increases, as the KOSPI suffered its worst month on record and semiconductor leaders lost momentum. The slide surpassed the single-month declines seen during the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis, with the heaviest damage concentrated in Samsung Electronics and SK Hynix after a selloff that accelerated from July 28 and was compounded by SK Hynix's earnings miss. The KOSPI fell from 8,476.48 at the end of June to 6,595.45 at the end of July, then staged a record one-day rebound of 17.91% on July 31 before slipping again to 6,153.55 by Aug. 4, still about 22% below its late-June level. Steve Kim, chief executive and co-founder of Four Pillars, said record leveraged positioning in Korean equities, including single-stock ETFs tied to Samsung and SK Hynix, magnified the damage for younger retail traders and may also limit any near-term rotation back into crypto because much of that capital has been wiped out. The rebound was driven by the end of forced selling tied to the unwinding of Situational Awareness, an AI-focused hedge fund founded by former OpenAI researcher Leopold Aschenbrenner, and by renewed optimism on AI infrastructure spending after strong U.S. tech earnings helped lift semiconductor shares globally. Analysts said August sentiment still hinges on semiconductor earnings, U.S. big tech AI spending, interest rates, foreign fund flows and the stability of leveraged products.