00:00Bloomberg recently assessed that Korea is becoming an unsuitable country for investment in Korea's
00:04stock market. This means that the volatility is so high that it's considered risky.
00:08Due to high volatility, many young people are now going bankrupt. Let's examine this issue more
00:13closely. Let's take a look right away. Recently, Bloomberg explained in their coverage of the
00:18Kospi's explosive fluctuations that individual investors have suffered huge losses due to
00:23unprecedented volatility. They reported that these investors are leaving the Korean stock market,
00:27saying that it's more like a casino than a stock market. Bloomberg also explained that Korea is
00:32becoming an unsuitable country for investment. After the Kospi hit its peak last June, it dropped
00:37by 40% in just 27 trading days. This is almost on par with the sharp decline in the Chinese
00:43stock
00:43market back in 2015. In particular, if you look only at the monthly decline rate, it has already
00:49surpassed the record set during the IMF financial crisis. According to the Korea Exchange, as of
00:53July 28, the Kospi fell by 28.9% in just one month. This figure exceeds the monthly decline rate
01:00of
01:00minus 27% recorded during the period of the financial crisis shock in October 1997. This decline is
01:06highly unusual even compared to the most shocking periods in Korean stock market history. Back in
01:12October 2008, during the global financial crisis, the Kospi's monthly decline rate was around 23.1%.
01:17The index is dropping faster than it did during the foreign exchange or global financial crises.
01:24On July 31, the Kospi rebounded sharply, surging 18% in a single day, but individual investors
01:30actually recorded the largest net selling in history and left the market. The Kospi's abnormal
01:35volatility impacting the Korean stock market centers on the single-stock leveraged ETF,
01:40a transparent system introduced by the government. The Korean government approved the product's launch
01:46last May, stating it would keep domestic investors' funds in the country and offer new investment
01:51opportunities. However, instead of its intended purpose, this high-risk product has become a
01:55ticking time bomb, undermining market stability. As a result, investors' funds have flowed not into
02:01sound company valuations or long-term growth investments, but into single-stock leveraged ETF
02:06products that chase extreme returns. As trading value has become much more concentrated in leveraged
02:11products, then in the actual value of large individual stocks like Samsung Electronics or
02:15SK Hynix, the normal stock market has turned into a giant casino. An unusual phenomenon has occurred
02:20where prices fluctuate wildly solely due to the concentration of funds, regardless of the
02:24underlying strength of the stock. If you look at the specific estimates from the global investment
02:28bank Goldman Sachs, the structural risks inherent in this product become clear. As of last June,
02:34when SK Hynix's stock price fluctuated by about 5% in a single day, the amount of rebalancing trades
02:39that the leveraged ETF had to mechanically execute to meet its target ratio reached nearly 40% of the
02:44stock's average daily trading volume. Nearly half of the total trading volume of large-cap stocks was
02:50filled with mechanical buying and selling just to match the leverage ratio, creating a vicious cycle
02:54where bubbles grew during price increases and panic selling was triggered during price drops.
02:59Additionally, the situation worsened due to the Korean stock market's unique structural weakness,
03:03extreme market capitalization concentration. Just two stocks, Samsung Electronics and SK Hynix,
03:09account for more than 50% of the total market capitalization of the COSPI, which is an abnormal
03:14proportion. In a structure where just two large-cap stocks can sway the entire index, if these two
03:19stocks plummet, the entire COSPI is bound to collapse helplessly. Concentrated trading flows,
03:24plus aggressive rebalancing of single-stock leveraged ETFs have triggered a chain reaction,
03:28making COSPI's volatility among the world's highest. In fact, in 2026 alone, there were as many as
03:3433 days when the COSPI index surged or plunged by more than 5% in a single day. During that
03:40time,
03:40Japan had only four days with moves of over 5% in one day, and the Hong Kong Hang Seng
03:45Index had none.
03:46This shows how unusually volatile the Korean stock market is. With funds focused on large-cap stocks
03:51and high-leverage speculative products, the Korean capital market now repeatedly faces extreme ups and
03:56downs. Due to this extreme volatility, individual investors have suffered enormous financial losses.
04:03Individual investors who entered the market based on government promises of reform and revitalization
04:09had to bear all losses when foreign investors withdrew large amounts of funds.
04:14In the case of the SK Hynix leveraged ETF, which attracted the most funds, it suffered a tragic plunge,
04:20dropping as much as 84% compared to its peak recorded last June. During this crash, as many as
04:25360,000 securities accounts were forcibly liquidated through margin call sell-offs.
04:30What's even more serious is that as much as 62% of these forcibly liquidated accounts belong to
04:35young investors aged 35 or younger. The main issue is that during the stock market boom at the time,
04:41a large number of young investors entered the market, but their participation led to borrowing
04:45beyond their own capital. Looking at the main indicator that shows they bought stocks on credit,
04:49the outstanding balance of margin loans at securities firms, investors in their 20s recorded
04:54423.9 billion won in the second week of April. This is more than 2.2 times higher than the
05:00188.8 billion won recorded just a year earlier. This shows that young people with weak finances have
05:06overused loans and credit to invest. Court statistics also reveal the burden from investment failures and
05:13loans. Data from the court administration office shows 81,723 personal rehabilitation applications were
05:19filed from January to June this year, the highest first-half figure on record. This is a 13.2%
05:25increase compared to the 72,192 cases filed during the same period last year.
05:3010 years ago, first-half applications were 47,229 and stayed in the 40,000 range until 2022.
05:37They rose to the 60,000 range in 2023 and the 70,000 range last year, and this year, for
05:42the first time,
05:43surpassed 80,000. If this sharp rise continues, personal rehabilitation applications could top
05:49160,000 by year-end for the first time ever. The total number of applications this year is expected
05:55to reach 163,446, an increase of 9.5% compared to last year, showing that the scale of rehabilitation
06:03applications has nearly doubled in just four to five years. Personal rehabilitation, once common among the
06:08self-employed and elderly, is now quickly increasing among people in their 20s, 30s, and regular wage earners.
06:14A sole metropolitan government survey of 1,025 people aged 29 or younger who applied for personal
06:20rehabilitation last year found their average debt was 69.26 million won. The combined effects of
06:25increased fixed expenses due to rising housing costs, principal losses from failed investments,
06:30and multiple debts tied to various financial institutions are pushing even salaried workers
06:34who are engaged in normal economic activities into situations where they can no longer handle their
06:39debts and are forced to choose personal rehabilitation. The main issue now is foreign investors leaving
06:44the Korean stock market and pulling out large amounts of money. The main reason for this is not
06:49simply because the index is falling. Large overseas institutional investors are most concerned about
06:55markets that lack predictability when choosing countries to invest in. With daily index or large cap
07:01stock swings of 10% to 20% becoming common, the Korean stock market is now seen less as a
07:06place for
07:07long-term, value-based investment and more as an unpredictable gambling venue.
07:11This extreme volatility is directly hurting global asset management firms and index providers'
07:16evaluations. Major global investment firms like MSCI automatically reduce portfolio investment in
07:23markets with high volatility and unstable prices following their risk management policies.
07:28If the market's autonomous price adjustment function becomes paralyzed and the influence of speculative
07:33funds becomes excessively large, global funds have no choice but to reduce
07:37their allocation to Korea and quickly withdraw their investment funds to protect their assets.
07:41The continuous outflow of foreign capital not only causes stock prices to fall but also delivers a
07:46serious secondary blow to the entire national economy. As foreign investors sell Korean stocks and
07:51exchange their one for dollars to pull out, the value of the one could drop sharply.
07:55For the sluggish Korean stock market to rebound and regain its previous upward momentum, changes in the
08:00semiconductor industry represented by Samsung Electronics and SK Hynix are expected to be the most decisive factor.
08:07Because of how the Korean capital market is structured, the two major semiconductor companies make up a huge part of
08:12Kospi's total market cap. Therefore, their quarterly earnings outlook and stock trends are not only key for their
08:17stocks but also crucial in shaping investor sentiment across the market.
08:21The key factor determining the direction of the semiconductor industry right now is whether the explosive growth and demand for
08:27AI
08:27semiconductors driven by the development of the global artificial intelligence industry can continue to maintain its upward trend in the
08:33future.
08:34In recent years, global IT giants and big tech firms have invested huge sums to build large data centers and
08:41secure high
08:41performance computing devices to dominate artificial intelligence.
08:45Samsung Electronics and SK Hynix have been key pillars of the next generation high bandwidth memory or HBM supply chain
08:52securing an
08:52unrivaled position in the global AI semiconductor ecosystem. However, recently, the focus of the global
08:58financial markets and major investors has shifted beyond the distant future potential of artificial
09:03intelligence technology to thoroughly verifying whether these investments are actually being realized as
09:07tangible sales and operating profits. If there is a growing skepticism that the AI-related facility
09:12investments of big tech companies, which are pouring in massive amounts of capital, are being delayed more than expected,
09:18or that their ability to generate profits does not meet expectations compared to the investment amounts,
09:23the high growth expectations and stock price premiums that semiconductor companies have enjoyed could
09:27quickly undergo a correction. Because Samsung and SK make up over half the market capitalization,
09:33uncertainty about their performance inevitably worsens overall supply and demand in the Korean stock market.
09:39I believe we should gradually address this lopsided concentration over time.
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