South Korea’s stock market plunges as AI-driven boom fades

SaveSharefacebookxwhatsapp-strokecopylinkLee Seung-ho, a university student and investor, looks at a stock trading platform after an interview with Reuters in Seoul, South Korea, July 15, 2026 [Kim Hong-Ji/Reuters]By ReutersPublished On 29 Jul 202629 Jul 2026South Korean stocks have dropped for a second consecutive session, with Seoul’s equity market losing about $2.18 trillion in value.Tuesday’s drop continued on Wednesday, putting the market on course for its steepest monthly drop on record.Recommended Stories list of 3 itemslist 1 of 3OpenAI’s rogue agent hacked an account at a second technology firm: Reportlist 2 of 3How are AI models able to autonomously hack others?list 3 of 3Is the world at risk of another energy shock?end of listInvestors are suffering losses following a sudden market plunge fuelled by reduced interest in chipmakers, which had previously enjoyed strong growth driven by AI investments.“If you look at what is falling in the market, it has been the stocks in which you have the most leverage,” said Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong. “It’s very difficult to say when will this selloff end, but at the moment, it’s definitely not the trade where we want to be.”The benchmark KOSPI .KS11 index dropped as much as 12.6 percent before trimming some losses to close down 6 percent, extending Tuesday’s near-11 percent rout. The slide has erased almost 40 percent of the index’s value from a peak reached little more than a month ago.Under pressure from lawmakers during a parliamentary session, South Korean Finance Minister Koo Yun-cheol apologised for the introduction of single-stock leveraged exchange-traded funds, or ETFs, saying they had not been considered carefully enough. He added that the government is reviewing market stabilisation measures, including regulation of the funds, which some analysts have blamed for increasing the amount of leveraged trading in Seoul’s market.Koo, the governor of the Bank of Korea, and heads of financial regulators met late Wednesday to discuss the crisis. The meeting came two weeks after their last meeting on July 16, when they announced tighter regulations to cool the ETF investment boom.In a statement after the meeting, the Ministry of Finance said it would immediately pursue further curbs on single-stock leveraged products, including individual investment limits — citing a cap of up to 20 percent of an investor’s total investment amount as an example — as well as higher trading costs to deter excessive activity and simulated trading requirements. It will also prepare a legal basis for emergency market-stabilisation steps.“There [were] definitely signs of panic and forced unwind in Asia technology today, not only on the long side, but also on the short side in Japan, where you saw heavily out-of-favour names such as Nintendo and Sony rallying very strongly to compound the pain,” said Jon Withaar, a senior portfolio manager at Pictet Asset Management in Singapore.Despite the tumble, the KOSPI is up 41.5 percent in United States dollar terms year-to-date, making it the best-performing major market this year.