Author: Nancy, PANews

The South Korean stock market, which had been soaring and approaching the 9,000-point mark, has recently turned sharply downwards. The continuous correction has left the large number of leveraged investors who borrowed money to enter the market feeling extremely vulnerable.

Following last week's "Black Friday," the South Korean stock market suffered another sharp decline this week. The KOSPI index plummeted at the open and hit its daily limit down, with both major market bellwethers, Samsung Electronics and SK Hynix, hitting their daily limit down. As the sell-off swept through the market, panic spread rapidly, prompting even Lee Jae-myung and Hwang In-hoon to intervene in an "emergency market rescue."

From nationwide celebration to mass stampede, the "ant army" panicked.

On June 8, the South Korean stock market continued its sharp decline from the previous Friday.

Shortly after the market opened, the South Korean KOSPI index fell by more than 8%, triggering the circuit breaker mechanism, and the Korea Exchange suspended trading for 20 minutes. Faced with the sharp market volatility, the Korea Exchange held an emergency meeting that morning to assess market risks and study measures to stabilize market operations.

Just a week ago, the South Korean stock market was one of the hottest markets globally. Driven by the AI ​​semiconductor boom, the KOSPI index repeatedly broke historical highs, even attempting to break the 9000-point mark. Large amounts of capital poured into the technology sector, with South Korean investors leveraging and borrowing to enter the market, hoping to ride the AI ​​wealth train.

However, just a few days later, the market sentiment shifted dramatically, and the "ant army" that had entered at high prices panicked, admitting they dared not open their accounts. In South Korea, retail investors are often referred to as "ants," similar to how American retail investors call themselves "apes." Although their individual strength is limited, their sheer numbers allow them to "swarm" into the market like ant colonies, influencing stock price movements. This group is mainly divided into two categories: those buying domestic stocks are called "Eastern Ants," while those flooding into overseas markets such as the US stock market are called "Western Ants."

The trigger for this round of sharp declines came from a collective correction in US tech stocks. Because the South Korean stock market is highly dependent on the semiconductor industry, the two chip giants, Samsung Electronics and SK Hynix, have been the core forces supporting the entire bull market. In the KOSPI index, these two companies account for a combined 54% weighting, and their average daily trading volume in May accounted for about half of the index's total trading volume. So far this year, nearly three-quarters of the KOSPI index's gains have come from these two companies. Just last Tuesday, the day the KOSPI hit a record high, only 2.6% of the constituent stocks reached 52-week highs, while 31% of the stocks fell to 52-week lows.

To some extent, the South Korean stock market was a bull market led by Samsung Electronics and SK Hynix, with SK Hynix employee uniforms even becoming a "battle armor" for finding a partner. Therefore, when the correction in US tech stocks triggered a revaluation of the AI ​​industry chain, Samsung Electronics and SK Hynix quickly became targets of selling, with both experiencing single-day declines approaching 10%, directly dragging down the entire South Korean stock market.

Meanwhile, foreign capital outflows and the depreciation of the Korean won further exacerbated market pressure. The latest US non-farm payroll data significantly exceeded expectations, reinforcing market expectations of interest rate hikes and pushing up the short-term dollar, prompting international funds to withdraw from emerging markets such as South Korea. Last week alone, foreign investors net sold over $10 billion worth of South Korean stocks. This massive capital outflow not only hit the stock market but also impacted the currency market. The Korean won weakened rapidly against the US dollar, falling to its lowest level since the 2009 global financial crisis. The risk of asset devaluation due to the currency depreciation further prompted overseas funds to leave, resulting in a double whammy of stock and currency losses.

More importantly, after a prolonged period of rapid growth, the South Korean stock market has accumulated a large amount of profit-taking. Coupled with a large amount of margin financing and leveraged ETFs concentrated in the AI ​​and semiconductor sectors, when leading stocks fall, margin pressure and forced liquidation together trigger a stampede effect, further amplifying market volatility.

In response to the market turmoil, South Korean President Lee Jae-myung issued an urgent statement, emphasizing that the South Korean stock market is still undervalued and stating that South Korea will promote the integrated application of AI across all industries and prepare large-scale investment projects related to the chip industry.

In an even more dramatic turn of events, just as the South Korean stock market was experiencing a sharp correction, Nvidia CEO Jensen Huang was on a trip to South Korea. During his visit, he announced a partnership between Nvidia and SK Hynix and revealed that he would meet with the head of Samsung. This move was seen as a vote of confidence in the South Korean semiconductor industry.

Leveraged stock trading raises concerns among regulators about "herd mentality".

Just as the cryptocurrency craze swept through South Korea years ago, South Koreans are now bringing the same madness to the stock market.

Public data shows that South Korea has over 102 million active stock trading accounts, while the total population is approximately 51.6 million, meaning that on average, each person has nearly two stock accounts. This investment enthusiasm is even evident among minors; in the first quarter of this year, the number of new accounts opened by minors surged nearly tenfold year-on-year, with many parents even opening accounts immediately after their children's birth and buying ETFs as their first investment.

This investment frenzy has permeated the daily lives of South Koreans. Every day around 3:30 PM, as the market closes, it's common to find a restroom stall in many office buildings and shopping malls in Seoul that's nearly full. Many office workers hide in the restrooms to check stock prices and manage their accounts; some even take time off work to stay home and monitor the market full-time; and some tech enthusiasts have even developed a stock trading website called "Excel Kospi," disguising the stock interface as office software so that employees can trade stocks "openly and legitimately" right under their bosses' noses.

What's driving this nationwide stock market frenzy is the astonishing profit potential.

According to Shinhan Investment & Securities, 80% of investors who sold Korean stocks in the first quarter of 2026 made a profit, averaging 8.48 million won (approximately US$4,654). Samsung Electronics was the biggest winner, averaging 7.14 million won (approximately US$4,654), followed by SK Hynix, averaging approximately 5.94 million won (approximately US$3,871). In contrast, the remaining 20% ​​of investors who lost money averaged approximately 4.96 million won (approximately US$3,232).

The huge profit potential further fueled FOMO (Fear of Missing Out) sentiment in the market. More and more investors, fearing they would miss out on the bull market, flocked to the market, some even borrowing money to speculate on stocks.

As of the end of May 2026, the balance of margin trading and securities lending at South Korean securities firms surged to a record 38 trillion won (approximately US$24.7 billion), a significant increase from 27.3 trillion won at the end of 2025. Meanwhile, a large amount of new lending funds are flowing into the stock market instead of the real estate sector. As of the end of May, the balance of personal credit loans at South Korea's five major commercial banks reached 106.99 trillion won, of which overdraft accounts rose to 41.93 trillion won, the highest level since 2021. In contrast, mortgage lending saw almost no growth during the same period.

Moreover, South Korean retail investors are using leveraged ETFs as a daily investment tool, betting heavily on the market with leverage.

For many South Korean retail investors, leveraged ETFs are no longer high-risk investment tools, but rather essential weapons for amplifying returns. Fueled by a bull market and the resulting profit-making opportunities, more and more investors believe that as long as the market direction is correct, leverage means faster wealth growth.

According to data released by the Korea Exchange (KRX) in April this year, since the beginning of the year, the average daily trading volume of 1,093 ETF products in the Korean market totaled 4.483 billion units. However, the average daily trading volume of just 88 leveraged ETFs, inverse ETFs, and 2x inverse ETFs reached 4.046 billion units, accounting for 90.49% of the total ETF trading volume. In other words, the main trading activity in the Korean ETF market is almost entirely concentrated on high-risk leveraged products.

In South Korea, investors must complete a one-hour online training course before trading leveraged ETFs; an additional hour of training is required for trading single-stock leveraged ETFs. However, this risk firewall has not dampened investor enthusiasm. According to the Korea Institute of Financial Investment Education, the average monthly number of participants three years ago was approximately 7,579, while this year the average monthly number has reached 149,948, a nearly 20-fold increase. Many of these investors simply open the course videos and leave them running to meet the account opening requirements, without paying attention to the operational mechanisms of leveraged products or their potential risks.

In response to surging demand for leveraged funds and the need to attract capital back to the domestic market, South Korean regulators recently approved the launch of the first batch of single-stock leveraged ETFs. Eight asset management companies launched 16 ETFs with 2x leverage and inverse leverage linked to Samsung Electronics and SK Hynix, hoping to attract back the large influx of "Western-style ants" (South Korean retail investors who have invested in the US) to the South Korean stock market, while simultaneously boosting the stock market and stabilizing the won. On the first day of the product launch, the website of the Financial Investment Education Center of the Korea Financial Investment Association experienced a temporary outage due to the overwhelming number of applications.

According to data from ETF Check, a South Korean securities calculation company, the KODEX Samsung Electronics Leveraged ETF saw the largest net inflow of individual investors from June 1st to 5th. The top four ETFs in terms of net individual inflows were all single-stock leveraged products related to Samsung Electronics and SK Hynix. Meanwhile, data from the Korea Exchange shows that in the first five trading days after its launch on May 27th, the four most actively traded single-stock leveraged ETFs accounted for 21% of the total trading volume of South Korean ETFs.

However, while leverage can amplify returns, it can also amplify losses exponentially. Especially when more and more retail investors concentrate their leveraged funds and ETFs on a few popular tech stocks, it can easily trigger a more severe stampede effect. For this reason, South Korean Finance Minister Koo Yoon-cheol recently expressed concern about the increase in leveraged stock investments and stated that he would take immediate measures to address the "herding effect" in the financial markets if necessary.

Infants open ETF accounts, and elderly people withdraw their insurance premiums and borrow money to speculate in stocks.

Amid this stock market boom, "silver funds" have become a significant force in the South Korean stock market.

According to South Korean media outlet Chosun Biz, brokerage branches in South Korea have been packed with customers recently, and the vast majority of investors who come in person to inquire about opening accounts and placing orders are senior citizens over 60 years old. Some are even planning to use their bank overdraft limits to buy popular stocks such as SK Hynix. A brokerage employee lamented, "I really don't know where our clients get so much money. From children to the elderly, it seems like there's no one who doesn't trade stocks."

According to financing data, investors aged 50 and above accounted for 62.3% of the total financing amount of the top ten securities firms; the financing balance of the group aged 60 and above surged from about 3.95 trillion won to 8.02 trillion won in one year.

To raise funds, many elderly people are even prematurely canceling their insurance products and investing their savings, originally intended for retirement, in the stock market. In Q1 2026, the three major life insurance companies in South Korea surrendered 4.9 trillion won in policies, a 16.3% increase year-on-year, with surrenders of savings-type life insurance policies increasing by over 23.2%.

In fact, besides stock trading, an increasing number of elderly South Koreans are also starting to trade cryptocurrencies. By the end of 2025, the number of investors aged 70 and above on South Korea's five major cryptocurrency exchanges increased from 30,000 in 2022 to 116,000 in 2025, a nearly fourfold increase in three years.

However, the large-scale entry of elderly people into the stock market has also raised concerns.

Many new elderly investors have very limited understanding of the basic procedures and risks of stock trading. Some don't even understand the settlement mechanism after selling stocks, yet they have started to buy and sell stocks frequently. Many others have entered the market hastily after hearing that their relatives and friends have made profits from popular stocks such as Samsung Electronics and SK Hynix, rather than based on their own research and investment judgment.