‍#TradFi交易分享挑战

The Korean stock market collapsed as expected, dragging down the Asia-Pacific market—how should we position next week?

Earlier last week, Little Wealthy One reminded everyone that the Korean stock market’s short-term rally had gotten too high and that there was a risk of a crash. We needed to stay alert for another “black swan.” On Friday, Korean stocks dropped as expected. The Korea KOSPI index plunged nearly 7%, triggering the circuit breaker mechanism. How big is the impact of this selloff, and how should we position for the future? Let’s take a look together.

1. Core reasons behind the plunge

1. Heavyweight technology stocks fell collectively, dragging down the index

‌Samsung Electronics‌ and‌ SK Hynix‌, as the two pillars of the Korean stock market, together account for nearly 45% of the total market value of the KOSPI. On May 15, both stocks saw sharp declines in their share prices, directly causing the index to slump by more than 6% and triggering the circuit breaker mechanism.

Net outflows from the technology sector exceeded ‌$2.5 billion‌, showing that foreign investors and institutions are accelerating their withdrawal from semiconductor assets. This reflects the market’s re-pricing of the global chip cycle, valuation levels, and short-term earnings expectations.

2. Geopolitical risks intensified, shaking market confidence

On May 4, the Korean cargo ship “HMM Namu” was attacked by a drone in the Strait of Hormuz, raising concerns about supply-chain security. Although Iran denied involvement, the United States has pointed the finger at Iran, and tensions have escalated.

The Middle East is home to nearly one-fifth of the world’s oil shipping routes. If the situation spirals out of control, it will seriously threaten the Korean economy, which is highly dependent on energy imports, undermining confidence among mid- and long-term investors.

3. Leveraged funds concentrated on forced closures, intensifying sell pressure

Korean stock investors—especially individual investors—participate at an extremely high level. Margin balances surged from 27 trillion won at the end of 2025 to 36.3 trillion won by the end of April 2026, setting a historical record.

The rapid decline in the market triggered forced liquidation of large numbers of margin accounts, creating a vicious cycle of “stock prices falling → liquidation → sell pressure → further declines,” especially concentrated in popular stocks such as Samsung and SK.

4. Foreign capital exited early, putting pressure on liquidity

Since May, foreign investors have net sold ‌$11.5 billion‌ worth of Korean stocks, and cumulative withdrawals have reached nearly ‌$48 billion‌ since the beginning of the year.

BlackRock’s iShares MSCI South Korea ETF saw an outflow of $970 million in a single week, setting a record for the largest weekly withdrawal in history. This shows that “smart money” has already reduced positions and left the market.

2. Impact on Asia-Pacific stock markets and gold & silver

1. After the Korean stocks plunged, Japan’s stock market quickly followed later in the day. The Nikkei 225 index at one point fell by more than 1.8%. Hang Seng Tech turned green in the final stretch of trading, indicating stronger risk linkages across the region.

2. The global linkage of the semiconductor industry chain means that turmoil in Korean technology stocks has raised the market’s concerns about earnings for overseas chip companies such as TSMC and ASML. The technology sector is generally under pressure.

3. Precious metals such as gold and silver were not spared. Spot gold fell below 4600 dollars/ounce, and silver once dropped by 3.6%, reflecting a broad withdrawal of capital from risk assets.

3. How to position for the future

1. Short term: Observe whether next week’s market continues falling, and look for opportunities to short

You can watch whether Korean stocks continue to fall sharply after next Monday’s open. If there is a gap-down open, you can short major Asia-Pacific equity index benchmarks (such as the Nikkei, Hang Seng, A50, etc.) in line with the move to target short-term gains. This short position is for short-term trading; it’s best to close it within the day or the next day.

2. Mid term: Pay attention to policy responses and changes in fundamentals

The South Korean government may introduce stabilization measures, such as restricting short selling and providing liquidity support. You should closely monitor regulatory developments.

Re-assessment of profitability in the semiconductor industry will remain a long-term driving force. If demand for AI infrastructure continues to be strong, the industry peak may be pushed back to after 2028.

3. Long term: Buy high-quality assets on dips

The total market value of the Korean stock market has already surpassed 7000 trillion won. Although there will be a short-term pullback, the logic of a structural bull market driven by AI remains unchanged.

After market sentiment stabilizes, investors can gradually allocate to Korean ETFs or core technology stocks via dollar-cost averaging, thereby diversifying timing risk. $USDJPY $AUDUSD $TSLA

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