South Korea’s stock market moved from a world-leading AI-driven rally to a sharp correction, exposing risks from retail-investor concentration and leveraged single-stock products. The KOSPI more than tripled from the previous year and exceeded 9,000 in June before falling roughly 40% over six weeks in June and July, erasing about $2.5 trillion in market value. It later recovered about 20% from its low and closed at 6,808.21 on the 26th. Retail investors, who accounted for 60%-70% of daily KOSPI trading, concentrated in Samsung Electronics and SK Hynix and suffered heavy losses when the AI semiconductor rally stalled. South Korea’s July 31 increase in cash-margin requirements for single-stock leveraged ETFs accelerated the deleveraging. Emerging-market equity volatility subsequently fell nearly 11 percentage points to 25%, after reaching 46% in July, while its premium over the U.S. VIX narrowed from nearly 30 percentage points to under 10 percentage points. The Bank of Korea said the market correction was delaying a recovery in household spending and could weigh on consumption with a lag. Risks remain because Samsung Electronics, SK Hynix and Taiwan Semiconductor Manufacturing account for about 30% of the iShares MSCI Emerging Markets ETF, while renewed changes in the AI outlook, Middle East tensions or a hawkish Federal Reserve could revive pressure.