#韩股大跌你会抄底吗 #每周来晒 Godlike in the rally, burying investors in the selloff: A complete review of the Korean stock market’s wild ride

Among the world’s major markets this year, South Korea’s stock market has been the most dramatic: In June, the KOSPI index surged to an all-time high of 9,385 points; just four months later, the index fell below 6,500 points, with a maximum drawdown of over 30%. It fell 33% in July alone, the worst monthly performance on record—worse than any single month during either the 1997 Asian financial crisis or the 2008 global financial crisis. The prevailing market explanation is that the “AI rally is fading.” But stopping there would underestimate the nature of this crash. This article attempts to break down the complete logic behind the Korean stock market’s wild ride from four angles: pricing power, the industrial cycle, the geopolitical landscape, and capital structure.

I. It did not lose valuation—it lost “pricing power”
The narrative behind this round of soaring Korean stocks was extremely simple: AI requires massive amounts of memory, while Samsung Electronics and SK hynix are the undisputed global leaders in memory chips. As a result, capital priced the Korean stock market as an “AI core asset.”
The problem is that profit distribution across the AI industry chain is a highly asymmetric pyramid: companies controlling chip design and ecosystems take most of the gross profit; cloud providers obtain stable cash flow through subscriptions and services; and although memory manufacturers have achieved record profit margins, they are still essentially in the business of “selling shovels”—the price of the shovel is determined by downstream demand, not by the seller. More importantly, the “switch” controlling the narrative is not in Seoul’s hands. When US AI-sector earnings fall short of expectations and sentiment toward technology stocks cools, global capital’s first reaction is to exit high-beta assets, and Korean stocks happen to be among the most sensitive instruments in this round of AI trading. When others tell the story and others hold the switch, such assets are naturally among the strongest gainers in a rally and the hardest hit in a selloff.

II. The expansion wave is approaching the top of the cycle
Memory is the most typical cyclical sector in the semiconductor industry, and the script has remained unchanged for decades: prices rise → manufacturers reap windfall profits → collective expansion → oversupply → price collapse → capacity exits → the next upswing. This script played out in full in both 2018 and 2022. What makes this round unusual is the scale of the expansion. According to public reports, the United States has publicly pressured Samsung and SK hynix several times in recent months to increase memory capacity and build plants in the US; the two leaders’ capital expenditure plans for the coming years are unprecedented in scale, while US manufacturers are also significantly increasing investment, compounded by capacity expansion among Chinese manufacturers—the memory industry is entering a rare wave of global expansion, all taking place at the moment of peak profitability.
Anyone with even modest experience in cyclical stocks understands what this means: today’s windfall profits are sowing tomorrow’s oversupply. Smart money in the capital markets is choosing to leave early, essentially pricing in advance the supply-demand landscape expected around 2027. This is more alarming than any single day’s negative news.

III. The Chinese market: squeezed by both import substitution and export restrictions
China once accounted for 30–40% of global memory-market demand and was one of the most important sources of profit for Samsung and SK hynix. This core market is undergoing structural change under pressure from two forces. First is the acceleration of import substitution. After domestic memory leaders completed their IPO fundraising, they entered an expansion phase; mainstream products such as DDR5 are already being mass-produced and shipped, while China’s memory industry chain continues to make broad breakthroughs. The previous expectation that “high-end memory would remain in long-term shortage and Korean manufacturers would dominate the entire market” is being revised by reality. Second is the tightening of export restrictions. Due to the impact of US export controls, Korean manufacturers’ operating flexibility at their plants in China has declined considerably; supplies of some advanced products to China are restricted, and around 30% of the two companies’ capacity in China faces adjustment pressure. As one side retreats and the other advances, the market space surrendered by Korean manufacturers is being rapidly taken over by domestic memory producers. It must be emphasized that this is structural pressure on market share, not a one-off cyclical fluctuation—the cycle will return, but market share may not.

IV. The result: After sentiment ebbed, retail investors were left holding the bill
South Korea has not been inactive over the past two years. From the slogan of “enhancing corporate value” to adjustments to short-selling policies, regulators and policymakers have supported the rally all the way, pushing the index to a record high. But when it came to actual cash dividends, buybacks, and corporate-governance reforms, progress remained limited. The result of capital voting with its feet was that foreign investors recorded substantial net outflows for the year, reaching a record level; foreign ownership of Samsung Electronics fell to its lowest level since the 2008 global financial crisis; and those who rushed in with leverage were primarily local South Korean retail investors—according to Korean media statistics, margin debt in the market at one point approached a historic high of 38 trillion won, while leveraged ETFs further concentrated and weakened the risk exposure. What followed was a textbook stampede: share prices fell → brokers issued margin calls → forced liquidations → share prices fell further → more liquidations. According to Korean media reports, around one million accounts received margin-call notices at the peak, and a large number of accounts were liquidated outright. The bubble jointly inflated by policy and sentiment ultimately burst in the hands of those who believed in it most.