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

What the report says

Al Jazeera, citing Reuters, reported that South Korean equities fell sharply for a second straight session on Wednesday, July 29, as enthusiasm for chip and artificial intelligence-linked stocks weakened. The benchmark KOSPI dropped as much as 12.6 percent intraday before closing 6 percent lower, following a nearly 11 percent fall on Tuesday. The report said Seoul’s market had lost about $2.18 trillion in value and was on track for its steepest monthly decline on record.

The selloff has hit stocks that had benefited from heavy AI-related investment, particularly chipmakers, and has erased nearly 40 percent of the KOSPI’s value from a peak reached a little more than a month earlier. Frank Benzimra of Societe Generale told Reuters the biggest declines were in highly leveraged parts of the market, while Jon Withaar of Pictet Asset Management described signs of panic and forced position unwinding across Asian technology trading.

South Korean Finance Minister Koo Yun-cheol apologized during a parliamentary session for the rollout of single-stock leveraged exchange-traded funds, saying they had not been sufficiently considered. Koo, the Bank of Korea governor and financial regulators met late Wednesday to discuss the turmoil, after a prior July 16 meeting that had already produced tighter ETF rules.

According to the Finance Ministry statement cited in the report, authorities plan further restrictions on single-stock leveraged products, including possible individual investment limits, higher trading costs, simulated trading requirements and a legal framework for emergency market-stabilization steps. Despite the plunge, Al Jazeera reported the KOSPI remained up 41.5 percent in U.S. dollar terms for the year, still the strongest performance among major markets.