Foreign capital withdrawal, retail leverage, and profit-taking are the main causes of South Korea’s “Black Monday.”

Mars Finance News, June 8 — Today, the Korean stock market continued its decline from Friday’s downturn, falling by more than 8% shortly after the opening and triggering a trading halt before suspending trading. Reports say that the Korea Exchange held an emergency meeting on Monday to assess the situation of intensifying market volatility and to discuss measures to ensure stable market operations.

Data shows that as the Kospi index hit a historical high last week, foreign investors have continued to withdraw; in just the past week, they net sold Kospi stocks worth more than $10 billion. The selling also put pressure on the Korean won, with the USD/KRW exchange rate reaching its lowest level since March 2009. In addition, data from the Korea Exchange shows that, benefiting from demand for AI-driven chips, Samsung Electronics and SK Hynix account for as much as 54% of the weighting in the Korea Composite Stock Price Index (KOSPI). In May, their average daily trading value accounted for about half of that index. Nearly three-quarters of this year’s KOSPI gains have come from these two companies.

When the benchmark index hit a historical high last Tuesday, only 2.6% of stocks reached a 52-week high, while 31% of stocks fell to a 52-week low. The astonishing rally has continued to drive a rise in retail leverage. Kenny Kim, CEO of Meridian One Asset Management, said, “The current market structure is vulnerable to a recession because it is mainly dominated by short gamma in leveraged ETFs.” However, retail investors—once a major driving force for the market—have become less willing to put new funds into the market.

According to data from the Korea Financial Investment Association, as of May 22, brokerage deposits fell from 137 trillion won on May 12 to 121 trillion won (about $79 billion). Meanwhile, data from the Korea Financial Intelligence Agency (KFIA) shows that as of May 29, margin balances reached a record 38 trillion won, up from 27.3 trillion won at the end of 2025. The signals are clear: cash buffers are shrinking, while active leverage is refusing to unwind.

Korea Investment & Securities analyst Kim Doo-yoon said the Korean market faces the risk of a “Black Monday” event because “currency instability, the repricing of interest rates, and profit-taking in the semiconductor industry are occurring simultaneously.”