Summary
- The report said the Kospi index’s volatility above 60% has produced swings severe enough to outpace Bitcoin (BTC).
- Samsung Electronics and SK Hynix led the AI rally, while a rapid expansion in leveraged ETFs deepened concentration in the Kospi, distorted the index and intensified volatility.
- South Korean retail investors were net buyers of more than $72.5 billion, while foreigners were net sellers of $108 billion including SK Hynix, prompting authorities to halt new listings of single-stock leveraged products.
Forecast Trend Report by Period
Volatility in South Korea’s Kospi index has become so extreme that it has surpassed Bitcoin, as an AI-driven rally centered on Samsung Electronics Co. and SK Hynix Inc. collides with a surge in leveraged exchange-traded funds.
Bloomberg reported on July 20 that the Kospi’s volatility has climbed above 60% this year. That is nearly double the level of Japan’s Nikkei 225 and even higher than Bitcoin, which is known for sharp price swings. Korea Exchange has triggered seven circuit breakers through mid-July this year. There were none in 2025 and only one in 2024.
Samsung Electronics and SK Hynix are at the center of the Kospi’s sharp moves. The two companies supply memory chips essential to AI systems and have delivered explosive earnings. As the AI boom drove their shares higher, their combined weighting in the Kospi rose above 50%. Even on the day the Kospi hit a record high in late June, more than 650 of its 831 constituents fell.
The rapid expansion of the leveraged ETF market has also fueled volatility. Goldman Sachs strategists wrote in a late-June report that assets invested in South Korea’s leveraged ETFs tied to indexes and single stocks had surged to more than $40 billion from $5 billion at the start of the year. Leveraged ETFs are now the key risk to watch, they added. Daily trading in those funds and their underlying shares accounts for more than 70% of turnover in the Kospi market, which is worth about $4 trillion.
South Korean retail investors have poured more than $72.5 billion into the Kospi this year. Foreign investors, by contrast, were net sellers of about $108 billion of Kospi stocks over the same period, with more than $40 billion leaving SK Hynix alone.
Authorities have also moved to cool the market. South Korea’s financial regulators announced on July 16 that they would temporarily halt new listings of leveraged products tied to single stocks. Gary Tan, a portfolio manager at Allspring Global Investments, said leverage was a key driver of the second-quarter rally in memory shares, so he remains cautious about calling a bottom.
