Bitcoin is supposed to be the wild ride. But in 2026, South Korea's main stock index has been the one throwing investors around.
Through July 20, the Kospi posted volatility topping 60%. That is roughly double what Japan's Nikkei 225 experienced. It is also higher than Bitcoin's own price swings. The national stock market of one of the world's largest economies is jumping around more than the most famous cryptocurrency.
The Korea Exchange had to hit the brakes seven times between January and mid-July, triggering circuit breakers - automatic trading halts meant to stop a freefall. In 2025, no circuit breakers were triggered, and only one occurred in 2024. Something clearly changed.
The root of the problem is simple: the Kospi has become a two-stock show. Samsung Electronics and SK Hynix together hold more than 50% of the index's total value as of July 15. Both companies make memory chips, and both have seen their stock prices surge because of AI demand.
That sounds good until you realize what it means for everyone else. When the index reached an all-time peak in late June, over 650 of the 831 listed stocks actually declined. So a big chunk of the market was going backward while a tiny slice carried the whole index upward.
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South Korean retail investors - known locally as "ants" because of their tendency to act in unison - poured more than 100 trillion won (roughly $67 billion) into Kospi shares this year. A lot of that cash went into leveraged ETFs, which are investment vehicles that employ derivatives and borrowed money to double the daily performance of a benchmark index or stock. The assets of these products ballooned, climbing from 5 billion dollars in early January to more than 40 billion dollars by the end of June. And 90% of the new single-stock leveraged ETFs tracking Samsung and SK Hynix were held by retail investors.
On the other side, foreign investors - predominantly fund managers required to cut their holdings in Samsung and SK Hynix due to concentration limits - were offloading shares. This year, they sold approximately 108 billion dollars worth of Kospi stocks, and SK Hynix alone saw outflows exceeding 40 billion dollars. When foreign pros sell in bulk and retail ants chase leverage, the market gets rough.
Goldman Sachs called it out directly. In a July 5 note, Goldman Sachs strategists identified leveraged ETFs as "the principal risk to monitor."
The risk is not theoretical. Samsung and SK Hynix, along with their related leveraged ETFs, now account for more than 70% of the daily trading value in South Korea's $4 trillion market. When those two stocks move, the whole index lurches. And when they drop, the leveraged ETFs amplify the fall - which can trigger margin calls, forced selling, and more drops.
Regulators stepped in on July 16, temporarily halting new listings of single-stock leveraged products. Back in 2025, regulators tried to temper local appetite for foreign leveraged ETFs, but the recent measure was far stricter.
The catch: The damage may already be in motion. The global AI trade has lost some momentum, and the leveraged products tracking Samsung and SK Hynix have fallen below their launch prices. According to Allspring Global Investments portfolio manager Gary Tan, "Given that leverage was a meaningful driver of the 2Q rally in memory names, we remain cautious in calling the bottom."
When a handful of stocks dominate and everyone piles into the same bet, a small shift in sentiment can turn into a big lurch in prices.
The regulators' move to stop new leveraged listings shows they are aware of the problem. The question is whether curbing new products will fix the existing pile of leverage. And the "ants" have a habit of panicking together.
For investors watching from outside, the lesson is not to avoid Korea entirely - it is to understand what is driving the swings. If AI chip demand stays hot, Samsung and SK Hynix could keep climbing. If it cools, the fall will be steep, and the leveraged funds will make it steeper.
But knowing the setup makes the ride a lot easier to understand.
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