Bank worker Yongjoon Kim has seen his savings evaporate, losing 20 million Korean won (approximately $14,000) in the South Korean stock market last month. The money, earmarked for a down payment on a home ahead of his wedding later this year, was invested in technology stocks that saw their value plummet by around 25% in July.
‘It’s going to sting and I’m going to have to work really hard to make up for this,’ Kim stated. ‘But for others who have taken more risk, they’re going to feel the pain.’ He added that many of his friends are in a more ‘desperate’ situation, having invested their entire savings.
The instability is particularly pronounced in South Korea’s tech-heavy Kospi index, widely considered one of the world’s most volatile. A global surge of interest in artificial intelligence has fueled dramatic swings in the valuations of the country’s major chipmakers.
Wee Khoon Chong, from financial services company BNY, described the period between June and August as witnessing ‘one of the sharpest corrections’ in the Kospi’s history, drawing parallels to the downturns seen during the Covid-19 pandemic and the 1997 Asian financial crisis. The index had more than doubled its value in the year leading up to mid-June, surpassing 9,000 points, before a rapid decline to 5,500 within weeks. It has since recovered some ground, currently trading around 6,800 points.
Chong identified concerns over the substantial investments being poured into AI as a primary driver for the recent sell-off.
The impact has been acutely felt by many individual investors in South Korea who had invested heavily in tech stocks over the past year. Woongsa Kim, another investor, described his trading app as a painful reminder of his market gains and subsequent losses. He had invested a significant portion of a work bonus at the start of the year into tech giant SK Hynix. The stock’s value quadrupled before most of those gains were erased, leaving his investment, now valued at approximately 300 million won, at roughly half its peak value.
‘Thinking about it just brings tears to my eyes,’ Kim told the BBC.
Investment analyst Tobias Reger noted that the sharp rise in tech shares prior to the sell-off had generated ‘extreme euphoria,’ prompting some retail investors to take out loans to invest. This trend has been particularly damaging for those who utilized leverage, a financial market tool that allows investors to control a larger number of stocks than their own capital would normally permit. While leverage amplifies profits when share prices rise, it can trigger margin calls – demands from brokers for repayment of debt – when prices fall below an agreed threshold.
By the end of July, an estimated 1.2 million South Korean individual investor accounts had faced margin calls, a figure representing approximately one in every 30 working-age adults in the country. Frank Benzimra, head of Asia equity strategy at Societe Generale, highlighted that leveraged trading is a growing trend among retail investors, also observed in markets like Taiwan and the US, further increasing the risks associated with AI-related stocks.
Chanyong Park, who works in marketing, recounted how a substantial profit from his US-listed Nvidia shares, which had soared by over 1,000%, was largely reinvested into SK Hynix. This bet soured as the shares’ value dropped by approximately $10,000. ‘This was money I’d invested to save before planning to leave my job around October to start my own business. But now I’m seriously wondering whether I’ll have enough,’ Park said.
Park intends to hold onto his SK Hynix shares in the hope of a market rebound, though recent volatility has made him cautious about further investment. ‘It doesn’t always feel like movements are driven by rational reasons – sometimes it still feels a lot like gambling,’ he commented.
Another investor, Youngji Park, described putting ‘all in’ with the majority of his available cash into Samsung shares, which had peaked at a total value of 45 million Korean won. His investment has since experienced a ‘gut-wrenching’ slump. Like others, he plans to retain his shares, hoping for a recovery. ‘I feel like a fool for trusting the Korean stock market,’ he admitted. ‘It’s a long-term game now. I’ll just have to wait it out.’
College student Soomin Yi, along with a friend, invested in SK Hynix due to ‘fomo’ (fear of missing out). She now regrets not selling her shares when they reached three million won each in June, instead of buying more based on speculation they would reach five million won. ‘We didn’t really have anyone around us who is experienced in investing, and we did not study investing seriously before buying the stock,’ Yi explained.
The significant fluctuations in Korean shares are also raising concerns about other global markets. Benzimra noted that tech-heavy indexes, such as Japan’s Nikkei 225, appear to be moving in tandem with the Kospi’s volatility. However, he believes that most global stock markets are unlikely to experience such extreme movements due to their broader diversification across various sectors.
‘I don’t think we can see the same kind of volatility in large diversified markets such as the [Tokyo Stock Price Index] or the US equity markets,’ Benzimra stated.
Investors who had diversified their portfolios reported that this strategy helped cushion the impact of the market downturn. Yongjoon Kim, who also holds shares in overseas markets, advised, ‘I think this whole episode is a warning to Korean investors, especially young investors, not to put everything in one basket and hope for the best.’ He acknowledged that he should have adopted a more cautious approach to investing in tech stocks.
Kim’s fiancée, Gaeon Lee, remains optimistic about a market recovery despite the loss of some of their home savings. However, she expressed concern for Kim, noting the toll that constant monitoring of their investments has taken on him. ‘Seeing our home savings take a hit in the stock market was definitely a wake-up call,’ she said.
