Korea's Retail Investors Lose Big as KOSPI Plunges 40% in Six Weeks

South Korea's retail investors suffered heavy losses as the KOSPI, which had surged on the artificial intelligence boom, collapsed in June and July, The Wall Street Journal reported.

In an article headlined "The World's Craziest Stock Market Turned Into a Ride of Terror," the WSJ said on the 24th that the KOSPI plunged about 40% over six weeks, wiping out roughly $2.5 trillion (about 3,300 trillion won) in market value.

The shock from the sell-off fell most heavily on retail investors, who account for 60% to 70% of daily trading volume on the domestic market. Individual investors — the so-called "ants" who had piled into AI chip stocks such as Samsung Electronics and SK hynix on faith in their rally — took large losses when market volatility spiked, according to the analysis.

The WSJ featured cases of actual investors. Yoon Jae-in, a 30-year-old English teacher, has cut back on spending such as taxi rides and travel after losing $19,000 (about 26 million won) on stock investments.

Yoon Kyung-min, a 44-year-old audio engineer, invested half of a severance payout in chip stocks and lost $7,200 (about 10 million won) in just one week. Yoon told the WSJ that the market "was going to keep going up forever."

The WSJ drew particular attention to the arrival in South Korea in May, just before the market crash, of single-stock leveraged exchange-traded funds (ETFs) built on underlying assets such as Samsung Electronics and SK hynix.

As single-stock leveraged ETFs, previously restricted, were permitted, participation by individual investors — including homemakers, students and retirees — rose sharply. But because the products track multiples of their underlying stocks' returns, losses also mounted quickly in a falling market, the WSJ noted.

Some analysts said that so-called FOMO — the fear of missing out — drew individual investors into the market, on worries they might be left behind by the brief but rapid market surge.

Jake Chung, a 30-year-old accountant, had not been an aggressive stock investor but decided the June surge in the domestic market was a chance to make short-term gains. Chung pulled about $21,000 (about 29 million won) from his savings and invested in SK hynix shares. In less than three weeks, the stock jumped 40%, and he sold to lock in the profit.

The trouble came afterward. Believing SK hynix's U.S. listing would fuel a further rise in the share price, Chung put about $29,000 (about 40 million won) into a leveraged ETF tracking SK hynix.

But as the market plunged afterward, that investment recorded a loss of about 70%.

On the extreme volatility of South Korea's stock market, the WSJ said the country, "which gave the world Squid Game and K-pop, has now become the stage for the world's craziest stock market, with stomach-churning volatility."