South Korea's AI stocks now set the tone for global markets as chipmaker swings ripple worldwide

How Korean stocks turned from trusty bellwether to AI frenzy

SINGAPORE, July 17 (Reuters) - Billions of dollars in leveraged bets on South Korea's AI darlings have warped a stock market once revered as a reliable barometer of global growth into a wild casino, confounding both regulators and investors. That volatility, felt on dealing desks from Tokyo to New York, has not only wreaked havoc with portfolios - it has also dramatically distorted investors' views on fundamentals in South Korea, a market at the heart of the global AI boom. More than half of all stock market circuit breakers on the benchmark KOSPI - trading curbs activated when the index loses more than 8% for at least a minute - in South Korean history have occurred in the past six months alone. "The index has decoupled from all of Korea's historical drivers," said Alexander Redman, chief equity strategist at CLSA. "Korea had been an easy market for strategists, with long-term faithful relationships ... to (help) pick entry and exit points," he said. Those relationships have since broken down and the main drivers of prices right now are capital flows from an explosion in single-stock leveraged funds, which promise amplified returns but have exacerbated volatility. The main targets of such funds are ⁠chipmakers Samsung Electronics (005930.KS), opens new tab and SK Hynix (000660.KS), opens new tab, big winners in the AI supercycle that now account for more than half of the KOSPI. The market is wandering from fundamentals. It is neither pricing the full extent of future earnings, with price-to-earnings ratios at Samsung and SK Hynix falling to below 5, nor responding to usually reliable economic correlations. Volatility for the KOSPI (.KS11), opens new tab has exploded and prices that once tracked U.S. benchmarks are now instead influencing Wall Street as a rally that doubled the index's market value in six months has turned sharply, losing 20% so far this month. "In the past, if Korea drops 7% on the day, I would not be talking to you," Redman said. "Now it's normal. But it makes institutional investors increasingly concerned." DIVORCED FROM FUNDAMENTALS South Korean retail investors had 34.37 trillion won ($23 billion) in margin loans at stake this week, slightly down from a June record of 38.6 trillion won, in what's become one of the strangest bear markets in recent memory. The rally rests not just on mountain of borrowed cash but extremely concentrated bets routed through leveraged single-stock exchange traded funds. Assets in a Hong Kong-listed twice levered SK Hynix fund (7709.HK), opens new tab are up more than 20 times since the start of the year to $7.78 billion, making it the largest of any such ⁠fund globally, with rebalancing flows big enough to tilt the market. "Some of the single-name leveraged ETFs have four times the average volume of the underlying stock," said Florian Neto, head of investment for Asia at Amundi. "When the assets under management are ballooning, we see the limits of the exercise of giving leverage on single names -- this is sending some warning signals for us," he said. Regulators are trying to walk between damping excesses, without raising worries about a wholesale crackdown that could spook investors and trigger the volatility they are trying to curb. This week, South Korea sought to block new launches of single-stock leveraged funds. From August 5, the minimum cash balance required to trade single-stock leveraged ⁠ETFs -- including those listed abroad -- will be tripled to 30 million won ($20,300). "The volatility in the Korean equity market has been insane recently," said Mike Sell, head of global emerging market equities for London-based asset manager Alquity. "So measures to restore a focus on fundamentals can only be welcomed...a return to rationality will be positive for long-term investors, in our view." CAN LEVERAGE WIN? To be sure, the market's transformation has winners, not least the soaring chipmakers. Insatiable investor appetite helped SK Hynix ⁠to the biggest U.S. capital raise by a foreign company on record last week, raising $26.5 billion. "Speculative capital is actually making permanent changes to companies," said Michael Green, chief strategist and portfolio manager for Simplify Asset Management. Still, for investors, who according to Bank of America's fund manager survey think an AI bubble is the top tail risk facing markets, moves in the Korean market matter. "I actually think it's right for ⁠pretty much every investor around the world to be paying very close attention to what's happening in Korea," said Damien Boey, portfolio strategist at Wilson Asset Management in Sydney. "The bull case is that earnings growth continues, the leverage wins out, and Korean equities fly. I don't think that the market action is telling you that the story is that simple." ($1 = 1,480.3000 won) Additional reporting by Hyeyoon Cho in Seoul. Writing by Tom Westbrook. Editing by Sam Holmes Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * ETFs Gregor Stuart Hunter Thomson Reuters Gregor Stuart Hunter is a correspondent reporting on breaking news on finance and markets in Asia, based in Singapore. During prior postings in Hong Kong, Taipei and Abu Dhabi, Gregor previously worked for Bloomberg News and The Wall Street Journal, and wrote for The Guardian, Monocle and Fortune, among others. He is a CFA Charterholder.

Korea's AI chip market is now the opening bell for global stocks

Korea's market now sets global AI sentiment. The Kospi-Nasdaq correlation has nearly tripled. SK Hynix's US listing extended Korea's influence into 24-hour trading. Fund managers in London, New York, and Tokyo have added a new step to their morning routine: checking South Korean stocks. Korea's $4 trillion equity market is now offering an early read on global AI risk appetite, as swings in SK Hynix and Samsung ripple through chip stocks worldwide. "We are all Korean investors now," said Hani Redha, a London-based portfolio manager at PineBridge Investments. JPMorgan Asset Management's chief Asia market strategist presented on Korea to the firm's global team for the first time in his 14 years on the job. The data confirms it. The 60-day correlation between the Kospi and the Nasdaq 100 has climbed to 0.46, near the highest in two years and almost triple its five-year average of 0.16. The linkage is even stronger during selloffs: the Nasdaq 100's sensitivity to the Kospi during periods of Korean market weakness hit the highest level since 1990 on July 7. SK Hynix joined the trillion-dollar club earlier this year, and its US-listed shares now extend Korea's influence into Wall Street trading hours. Redha tracks Seoul, then SK Hynix's ADRs, then Korea-focused ETFs in New York. "It's like almost 24-hour tracking," he said. The influence comes with a cost. The Kospi has become one of the world's most volatile major benchmarks, with leveraged single-stock products amplifying swings. A Monday selloff driven by scepticism about AI demand triggered a near 9% Kospi drop that spilled into Wall Street, dragging SK Hynix's US shares down 9.3%. The Kospi has tumbled 25% since its June peak, a $1 trillion wipeout. South Korea temporarily halted new listings of single-stock leveraged ETFs to curb the speculation. The benchmark is still up 62% for the year. South Korea committed $880 billion over a decade to chips, AI data centres, and robots, and Samsung and SK Hynix control the majority of global memory chip supply. As long as that supply bottleneck holds, Korea's sentiment-driven trading will keep setting the tone for every AI stock that depends on it. "This is the new normal investors have to accept, as long as the AI rally continues," said Chisa Kobayashi at UBS. The question is whether a market driven by retail leverage in Seoul should be the one telling London what to think about AI.

Korea's AI-heavy market now sets the tone for global stocks | Fortune

For fund managers in London, New York and Tokyo, a new ritual has emerged before trading gets underway: checking South Korean stocks. Once a peripheral market for many global investors, Korea's $4 trillion equity market is offering an early read on risk appetite as AI-driven swings in Samsung Electronics Co. and SK Hynix Inc. ripple through global chip stocks. The shift is reshaping investment routines. JPMorgan Asset Management's chief Asia market strategist gave a presentation on Korea to the firm's global team for the first time in his 14 years on the job. Japanese traders are adding the Kospi Index to their watch lists. "We are all Korean investors now," said Hani Redha, a London-based portfolio manager at PineBridge Investments. But the market's growing influence comes with a catch. The Kospi has become one of the world's most volatile major benchmarks, with leveraged trading amplifying swings. SK Hynix's recent US listing has extended Korea's influence into Wall Street. The result is the country's sentiment-driven trading increasingly setting the tone for global AI stocks around the clock. Korea may see another turbulent session when markets reopen following a long weekend. Global chip peers were sold off on Friday as a surprise breakthrough from a Chinese AI startup renewed doubts over massive capex investment. Redha starts each day by checking Seoul for a read on the AI trade. Once the Korean market closes, his focus shifts to SK Hynix's American depositary receipts and Korea-focused exchange-traded funds in New York. "It's like almost 24-hour tracking," he said. That dynamic was on full display last week. A local selloff on Monday driven by fresh skepticism about future demand for AI triggered a near 9% drop in the Kospi, before the weakness spilled into Wall Street. SK Hynix's US-listed shares dropped 9.3%, dragging down other major chip stocks. READ: Korea's AI Stock Rout Is Becoming a Lesson in Leveraged Excess The tighter linkage is increasingly visible in the data. The 60-day correlation between the Kospi and the Nasdaq 100 has climbed to 0.46, near the highest level in two years and almost triple its five-year average of 0.16, according to data compiled by Bloomberg. "Korea has effectively become part of the same volatility ecosystem as the Nasdaq and SOX, with SK Hynix, Samsung and the Kospi now functioning as a pre‑market read‑through on US AI and semiconductor risk," said Ivan Feinseth, New York-based chief investment officer at Tigress Financial Partners. He added that the Asian country is no longer "a distant emerging-market side show." Korean stocks' influence appears even more pronounced when they suffer a downturn. The Nasdaq 100 Index's sensitivity to the Kospi during periods of Korean market weakness climbed to the highest since 1990 on July 7, according to Bloomberg-compiled data. A similar measure for the MSCI World Index has also risen to a four-year high earlier this month. Correlation between the Kospi and Japan's Nikkei 225 has also surged. That's prompted Ortus Advisors' head of Japan equity strategy Andrew Jackson to add a chart of the Kospi for close monitoring earlier this year, a first for him in more than two decades. Herald van der Linde, head of equity strategy for Asia Pacific at HSBC Holdings Plc, said Korea is discussed in "all meetings" nowadays. Over at JPMorgan Asset Management, its chief market strategist for Asia Pacific Tai Hui said "I think I've not presented to my global team on Korea until this year." Korea's influence, however, may shrink as the market rout continues. The Kospi Index has tumbled 25% since its June peak, resulting in a $1 trillion wipeout that threatens to weaken its global clout. Its chipmaker duo have both lost at least 30% of their value. The country's decision to temporarily halt new listings of single-stock leveraged exchange traded products may also help curb speculation and volatility. READ: The Leveraged AI Bet That's Whipsawing Markets Around the World Still, the benchmark remains up 62% for the year, among the world's best performers. Given the pivotal role of SK Hynix and Samsung Electronics in memory chip supply, the Korean market will likely remain the heartbeat of global AI investment in the foreseeable future. "This is the new normal investors have to accept, as long as the AI rally continues," said Chisa Kobayashi, Japan equity strategist at UBS SuMi TRUST Wealth Management. "The fact that markets are being driven by a relatively immature market with leverage-related swings, makes trading difficult because moves can deviate from fundamentals."

Asian shares mostly gain and South Korea and Japan recover some losses from AI stock sell-offs

HONG KONG (AP) -- Asian shares mostly gained on Tuesday, with markets in South Korea and Japan trading higher after recent declines due to heavy selling of stocks linked to artificial intelligence. U.S. futures edged higher, while oil prices slipped. South Korea's Kospi, which is heavily reliant on AI and chipmaking-related shares, jumped 4.7% to 6,821.41. It fell 4.5% a day earlier. Samsung Electronics surged 7.4%, while memory chip maker SK Hynix gained 6.4%. The Kospi has gained more than 50% so far this year, but fell more than 20% over the past month as investors sold to lock in profits, wary of worries about a potential bubble in AI investments. Tokyo's Nikkei 225 added 2.8% to 65,926.41 after a holiday on Monday, recovering from some of its losses from last week. Computer memory maker Kioxia Holdings surged 15.9%, while chip testing equipment maker Advantest jumped 6.9%. OpenAI investor SoftBank Group climbed 6.1%, while chip equipment maker Tokyo Electron added 1.3%. Taiwan's Taiex, which also has benefited from the AI boom, was up 3.6%. Its advanced AI chipmaker TSMC, or Taiwan Semiconductor Manufacturing Co., advanced 2.8%. Hong Kong's Hang Seng edged less than 0.1% higher to 25,150.75. The Shanghai Composite index added 0.6% to 3,819.66. Australia's S&P/ASX 200 climbed 0.1% to 8,798.00. India's Sensex gave up 0.1%. Oil prices fell early Tuesday after gaining the day before. Brent crude, the international standard, fell below $90 a barrel, down 0.7% to $88.63. But it's still well above the roughly $72 per barrel level it was at before the war started in late February. Benchmark U.S. crude lost 0.3% at $82.24 a barrel. Early Tuesday, Iran attacked another tanker in the Strait of Hormuz, a crucial waterway for global oil and gas transport. The U.S. announced another round of strikes targeting Iran for a 10th straight night. Iran has been retaliating against the U.S. strikes by targeting U.S. allies across the Middle East. As the U.S. and Iran traded fire, Iran's interior minister traveled to Pakistan, a main mediator, for talks, but it's still unclear if a new deal may be reached. "There's some hope of de-escalation between the U.S. and Iran," ING commodities strategists Warren Patterson and Ewa Manthey wrote in a commentary Tuesday. "This won't be an easy task. Large divisions remain between the U.S. and Iran." A naval blockade by Yemen's Iranian-backed Houthis against Saudi Arabia has increased risks to oil supplies, they said. On Monday, Wall Street's benchmark S&P 500 slipped 0.2% to 7,443.28. The Dow Jones Industrial Average dropped 0.6% to 51,839.26, while the technology-heavy Nasdaq composite dipped less than 0.1% to 25,508.07. Many of the major chipmaking and other AI-related stocks gained. Nvidia climbed 0.2%, Micron Technology rose 1.9%, and Broadcom was up 2%. AMD, or Advanced Micro Devices, added 1.6% after it announced an expanded partnership with Microsoft on AI. In other dealings early Tuesday, the U.S. dollar fell to 162.48 Japanese yen from 162.50 yen. The euro was unchanged at $1.1414. ___ AP Business Writers Stan Choe and Matt Ott contributed to this report.

Asian Shares Mostly Gain and South Korea and Japan Recover Some Losses From AI Stock Sell-Offs

HONG KONG (AP) -- Asian shares mostly gained on Tuesday, with markets in South Korea and Japan trading higher after recent declines due to heavy selling of stocks linked to artificial intelligence. U.S. futures edged higher, while oil prices slipped. South Korea's Kospi, which is heavily reliant on AI and chipmaking-related shares, jumped 4.7% to 6,821.41. It fell 4.5% a day earlier. Samsung Electronics surged 7.4%, while memory chip maker SK Hynix gained 6.4%. The Kospi has gained more than 50% so far this year, but fell more than 20% over the past month as investors sold to lock in profits, wary of worries about a potential bubble in AI investments. Tokyo's Nikkei 225 added 2.8% to 65,926.41 after a holiday on Monday, recovering from some of its losses from last week. Computer memory maker Kioxia Holdings surged 15.9%, while chip testing equipment maker Advantest jumped 6.9%. OpenAI investor SoftBank Group climbed 6.1%, while chip equipment maker Tokyo Electron added 1.3%. Taiwan's Taiex, which also has benefited from the AI boom, was up 3.6%. Its advanced AI chipmaker TSMC, or Taiwan Semiconductor Manufacturing Co., advanced 2.8%. Hong Kong's Hang Seng edged less than 0.1% higher to 25,150.75. The Shanghai Composite index added 0.6% to 3,819.66. Australia's S&P/ASX 200 climbed 0.1% to 8,798.00. India's Sensex gave up 0.1%. Oil prices fell early Tuesday after gaining the day before. Brent crude, the international standard, fell below $90 a barrel, down 0.7% to $88.63. But it's still well above the roughly $72 per barrel level it was at before the war started in late February. Benchmark U.S. crude lost 0.3% at $82.24 a barrel. Early Tuesday, Iran attacked another tanker in the Strait of Hormuz, a crucial waterway for global oil and gas transport. The U.S. announced another round of strikes targeting Iran for a 10th straight night. Iran has been retaliating against the U.S. strikes by targeting U.S. allies across the Middle East. As the U.S. and Iran traded fire, Iran's interior minister traveled to Pakistan, a main mediator, for talks, but it's still unclear if a new deal may be reached. "There's some hope of de-escalation between the U.S. and Iran," ING commodities strategists Warren Patterson and Ewa Manthey wrote in a commentary Tuesday. "This won't be an easy task. Large divisions remain between the U.S. and Iran." A naval blockade by Yemen's Iranian-backed Houthis against Saudi Arabia has increased risks to oil supplies, they said. On Monday, Wall Street's benchmark S&P 500 slipped 0.2% to 7,443.28. The Dow Jones Industrial Average dropped 0.6% to 51,839.26, while the technology-heavy Nasdaq composite dipped less than 0.1% to 25,508.07. Many of the major chipmaking and other AI-related stocks gained. Nvidia climbed 0.2%, Micron Technology rose 1.9%, and Broadcom was up 2%. AMD, or Advanced Micro Devices, added 1.6% after it announced an expanded partnership with Microsoft on AI. In other dealings early Tuesday, the U.S. dollar fell to 162.48 Japanese yen from 162.50 yen. The euro was unchanged at $1.1414. ___ AP Business Writers Stan Choe and Matt Ott contributed to this report.

South Korean shares fall over 5% on AI spending concerns and oil spike

South Korean shares declined significantly on Friday due to AI spending concerns. Mega US tech firms' moderation in AI outlays impacted Asian chipmakers' outlook. Oil prices exceeding $100 a barrel also contributed to the negative market sentiment. Major chipmakers like Samsung Electronics and SK Hynix experienced substantial losses. The benchmark KOSPI index triggered a trading curb, reflecting investor caution. South Korean shares retreated more than 5% on Friday on worries that a moderation in AI spending by mega U.S. technology firms ⁠will ⁠dampen the outlook for heavyweight Asian chipmakers, with oil prices above $100 a barrel also weighing on sentiment. The benchmark KOSPI was down 386.33 points, or 5.44%, at 6,710.56 as of 0246 GMT, partly erasing gains from the previous three sessions. The decline triggered a "sidecar" trading curb on the KOSPI, temporarily halting programme trading. US MarketsPowered By As on 24 Jul 2026, 01:30 AM IST S&P 500 Top Gainers Lockheed Martin568.59(10.54%) Allegion154.57(10.45%) United Rentals1,140(10.11%) Thermo Fisher Scientific572.32(8.71%) Gainers" S&P 500 Top Losers Tesla319.69(-14.52%) T-Mobile US170.42(-10.75%) Molina Healthcare200.29(-9.67%) Rollins39.44(-9.27%) Losers" The won crept higher to a near 11-week high of 1,463.1 per dollar on the onshore ⁠settlement platform. Among index heavyweights, chipmaker Samsung Electronics fell 7.22%, while peer SK Hynix lost 6.83%. Battery maker LG Energy Solution slid 5.46% Overnight, shares ⁠of Google parent Alphabet sank more than 7%, while those of Microsoft, Meta Platforms and Amazon slipped up to 4% as investors worried about payoffs lagging the pace of soaring AI spending. Chipmakers, in particular South Korea's SK Hynix and Samsung Electronics, and Taiwan's TSMC, have been among the biggest beneficiaries of the AI spending boom, making them vulnerable to any slowdown in outlays. Brent crude's climb back above $100 a barrel on an escalating Middle East conflict stoked fears of a fresh inflation shock and added to the risk-off mood. Elsewhere on the KOSPI, Hyundai Motor and sister automaker Kia Corp were down ⁠9.09% and down 8.28%, respectively. Steelmaker POSCO Holdings shed 3.86%, while drugmaker Samsung BioLogics rose 9.79%. Of the total 916 traded issues271 shares advanced, while 609 declined. Foreigners were net sellers of shares worth 1.63 trillion won ($1.11 billion). In money and debt markets, September futures on three-year Treasury bonds lost 0.12 point to 102.57. The most liquid three-year Korean treasury bond yield rose by 5.8 basis points to 3.965%, while the benchmark 10-year yield rose by 5.9 basis points to 4.442%.

Global Market: Citi downgrades South Korea to neutral as AI chip volatility mounts

Citigroup has downgraded South Korea to neutral after a year-long overweight stance, citing heightened volatility in AI-linked chip stocks and stretched valuations. While remaining positive on the long-term AI theme, the brokerage retained an overweight rating on Taiwan and upgraded China, signalling a shift in emerging market positioning. South Korea's stock market has lost its top spot in global investors' tactical playbooks, with Citigroup downgrading the country to a neutral stance after keeping it overweight for the past year, citing heightened volatility in AI-linked chip stocks, according to Reuters. The move comes after a sharp swing in sentiment toward semiconductor stocks, which had powered South Korea's benchmark KOSPI index to become one of the world's best-performing equity markets this year. However, recent weeks have seen heavy volatility driven by retail enthusiasm for leveraged single-stock exchange-traded funds (ETFs) and growing concerns over stretched valuations, Reuters reported. AI optimism remains, but exposure trimmed Despite the downgrade, Citi said it remains structurally positive on the long-term artificial intelligence investment theme. According to Reuters, the bank has opted to reduce its tactical exposure to South Korea while keeping an overweight position on Taiwan and upgrading China to overweight in its emerging markets allocation. US MarketsPowered By As on 18 Jul 2026, 01:30 AM IST S&P 500 Top Gainers Travelers Companies368.98(9.22%) Seagate Technology Hldgs787.66(5.66%) Centene66.44(3.99%) Humana400.00(3.50%) Gainers" S&P 500 Top Losers Intuitive Surgical345.42(-14.15%) Cadence Design Systems330.11(-9.47%) Coterra Energy32.56(-8.62%) Synopsys384.28(-7.85%) Losers" The brokerage also noted that conversations with clients are increasingly focused on the possibility of broader market leadership emerging in the second half of 2026. Even so, Citi remains cautious about making a wholesale shift away from technology stocks, Reuters said. Rotation gathers pace across emerging markets The changing market leadership has also been highlighted by Yardeni Research, which downgraded emerging markets to a market-weight recommendation. Reuters reported that the firm cited rising oil prices, a stronger U.S. dollar supported by the Federal Reserve's hawkish stance, and signs of AI-related fatigue in South Korea and Taiwan as reasons for the downgrade. According to Yardeni, market leadership has rotated significantly in July, with South Korea and Taiwan -- two of the strongest-performing markets earlier this year -- now emerging as the weakest performers during the month. Sharp monthly losses after stellar gains South Korean equities have fallen about 23% so far in July, although they remain up roughly 55% for the year. Taiwan's stock market has declined around 8% during the month but continues to show gains of approximately 47% in 2026, according to Reuters. The sharp pullback reflects investors' reassessment of AI-driven valuations after months of strong gains, even as the longer-term outlook for the sector remains broadly constructive. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

South Korea's share market losses deepen as leveraged AI bets take a heavy toll

South Korean shares experienced a significant decline, triggering market-wide trading curbs. Investors are unwinding AI-linked trades, extending a sharp correction in the KOSPI index. This selloff highlights growing investor anxiety over leveraged bets on AI chipmakers. Markets also reacted to escalating Gulf conflict and rising oil prices. Major tech earnings are expected to further test investor confidence in the AI sector. South Korean shares fell nearly 5% on Monday, triggering market-wide trading curbs as investors unwound AI-linked trades, extending a bruising correction that has wiped out more than a quarter of the KOSPI's value since its June peak. The selloff highlighted mounting investor anxiety over a market increasingly driven by leveraged bets on ⁠AI ⁠chipmakers. Once a peripheral market for global investors, South Korea has become a key barometer of enthusiasm for the AI boom, and is now feeling the downside as sentiment turns. US MarketsPowered By As on 18 Jul 2026, 01:30 AM IST S&P 500 Top Gainers Travelers Companies368.98(9.22%) Seagate Technology Hldgs787.66(5.66%) Centene66.44(3.99%) Humana400.00(3.50%) Gainers" S&P 500 Top Losers Intuitive Surgical345.42(-14.15%) Cadence Design Systems330.11(-9.47%) Coterra Energy32.56(-8.62%) Synopsys384.28(-7.85%) Losers" The benchmark KOSPI fell as much as 4.7% as traders returned after a long weekend. It was trading down 3.8% at 6,565 points as of 0240 GMT. The chipmaker-heavy gauge has now fallen 28% from its June 22 record-high, extending a four-week losing streak that has brought a dramatic halt to this year's historic rally. A sidecar trading curb was triggered on both the KOSPI and the junior ⁠Kosdaq indexes, halting programme trading for five minutes. Volatility has been amplified by heavy inflows into single-stock leveraged funds, which have drawn waves of retail investors while leaving them exposed to outsized losses when momentum reverses. Citi ⁠on Sunday cut its recommendation on South Korea to a tactical neutral from overweight after keeping the market in its preferred category for a year, citing heightened volatility rather than any deterioration in fundamentals. "While Korea still screens as the top market in our allocation model, we downgrade to neutral on a tactical basis given ongoing volatility," said Citi analysts, who maintain a KOSPI target of 10,000. That represents a gain of about 50% from current levels. Markets were also on edge as an escalating conflict in the Gulf lifted oil prices and reignited inflation concerns. A packed week of major tech earnings is expected to further test investor faith in the AI trade. Shares of SK Hynix, the world's leading AI memory chipmaker, and those of its rival Samsung Electronics , fell nearly 6% each. The two stocks make up just over half ⁠of the benchmark KOSPI gauge. Hyundai Motor tumbled 7% to its lowest since mid-January this year as a union began a four-hour strike. Sister automaker Kia Corp's shares also fell 7.5%. Market breadth was overwhelmingly negative, with 778 stocks falling versus 114 gainers among 912 traded issues. Foreign investors were net buyers of 415.1 billion won ($280.3 million) worth of shares. In the currency market, the won was fetching 1,481.1 per dollar on the onshore settlement platform, 0.33% higher than its previous close at 1,486.0. The most liquid three-year Korean treasury bond yield rose by 5.8 basis points to 3.910%, while the benchmark 10-year yield rose by 4.7 basis points to 4.341%. ($1 = 1,480.9000 won)

South Korea's Kospi drops 4.5% as some AI stocks swoon, while oil keeps climbing

HONG KONG -- Asian shares were mostly lower on Monday and South Korea's Kospi fell 4.5 per cent as investors unloaded more stocks linked to artificial intelligence. Japan's markets were closed Monday for a holiday. U.S. futures edged lower. Oil prices jumped as the U.S. and Iran moved closer to resuming an all-out war. Early Monday, the U.S. announced more attacks for a ninth straight night. Iran has been responding to U.S. strikes by hitting U.S.-allies across the Middle East. Brent crude, the international standard, rose 3.2 per cent to US$90.95 per barrel and benchmark U.S. crude climbed 2.8 per cent to $84.04 per barrel. "The U.S. and Iran continue to exchange strikes, which are proving to be deadly for both sides," ING commodities strategists Warren Patterson and Ewa Manthey wrote in a commentary Monday. "If this escalation goes unchecked, we could return to an environment of wide-scale attacks across the Persian Gulf." Tanker traffic in the Strait of Hormuz, a crucial waterway for global oil transport, have nearly ground to a halt, adding to pressures on supplies, they noted. In Asian share trading the Kospi, which has benefited substantially from the global AI frenzy, sank 4.5 per cent to 6,516.27. Two of its most valuable stocks booked losses. Samsung Electronics lost 4.7 per cent, while memory chip maker SK Hynix fell 4.5 per cent. Taiwan's Taiex, also heavy in AI-related stocks, was 0.5 per cent lower as its leading chipmaker, TSMC, or Taiwan Semiconductor Manufacturing Co., climbed 1.3 per cent. It had fallen 7.3 per cent on Friday after the company announced it plans to spend an additional $100 billion to expand its chipmaking capacity in the U.S. Hong Kong's Hang Seng rose 1.7 per cent to 24,984.24, while the Shanghai Composite index edged 0.1 per cent lower, to 3,761.40. Australia's S&P/ASX 200 fell 0.1 per cent to 8,791.30. India's Sensex slipped 0.7 per cent. AI-related shares including chipmaking stocks declined on Friday, pulling world markets lower. Pledges of huge spending on AI are fueling worries the sector may be in a bubble, and many investors have opted to sell to lock in profits from recent big gains. "The return to war in the Strait of Hormuz may start to weigh more heavily on financial markets before too long, especially if even strong tech earnings reports continue to be met with scepticism," Jonas Goltermann, chief markets economist at Capital Economics wrote in a note Monday. Markets were also shaken by the rollout of another powerful Chinese AI model, this time by Beijing-based Moonshot AI. The impact of the new Kimi K3 open-source AI model was similar to when China's " DeepSeek moment" rattled world markets in early 2025. It was viewed as another sign of how lower-cost, capable Chinese AI models are increasingly challenging rivals like Anthropic's Claude and OpenAI's GPT. On Wall Street, the benchmark S&P 500 ended the week down 1 per cent at 7,457.69. The Dow Jones Industrial Average fell 0.8 per cent to 52,146.42, while the technology-heavy Nasdaq composite lost 1.4 per cent to 25,520.24. Chipmaking stocks took a hit, with Nvidia falling 2.2 per cent, while Broadcom and AMD, or Advanced Micro Devices, fell one per cent. SpaceX, Elon Musk's rocket company, dropped 5.4 per cent after dropping below its initial public offering price of $135 a share, reaching its lowest point since its stock began public trading on the Nasdaq last month. In other dealings, the U.S. dollar fell to 162.40 Japanese yen from 162.43 yen. The euro was trading at $1.1437, down from $1.1438.

South Korean stocks emerge as key gauge for global AI sentiment By Investing.com

Investing.com -- South Korea's $4 trillion equity market has become an important early indicator of global risk appetite, as swings in Samsung Electronics Co Ltd (KS:005930) and SK Hynix Inc (KS:000660) spread across semiconductor and artificial intelligence stocks, Bloomberg reported. Fund managers in London, New York and Tokyo are increasingly monitoring the Kospi before their domestic markets open. The index provides an early indication of sentiment toward memory chips and AI infrastructure spending. That influence reflects the central role Samsung and SK Hynix play in global semiconductor supply. Both companies produce high-bandwidth memory used alongside AI accelerators from NVIDIA Corporation (NASDAQ:NVDA) and other chip designers. The relationship with US stocks has strengthened sharply. The 60-day correlation between the Kospi and Nasdaq 100 reached 0.46, close to a two-year high and nearly three times its five-year average of 0.16. Korean market declines have had an even greater effect. The Nasdaq 100's sensitivity to below-trend Kospi returns recently climbed to its highest level since 1990, with a similar measure for the MSCI World Index reaching a four-year high. Last week, concerns about future AI demand sent the Kospi down nearly 9% in one session before the selling reached Wall Street. SK Hynix's US-listed depositary receipts fell 9.3%, pulling other major chipmakers lower. Its American listing and Korea-focused exchange-traded funds now allow investors to track the market's AI exposure across most of the global trading day. Leverage has amplified those movements, making the Kospi one of the most volatile major equity benchmarks. South Korea temporarily halted new listings of single-stock leveraged exchange-traded products to curb speculative activity. The Kospi has fallen 25% from its June peak, wiping about $1 trillion from its value. Samsung and SK Hynix have each lost at least 30% during the pullback. Despite the correction, the benchmark remains up 62% in 2026, keeping it among the world's strongest-performing major markets.

Global Market: South Korea's AI-driven stock frenzy fuels volatility, challenges market fundamentals

The sharp swings have unsettled investors and regulators alike, with market movements increasingly driven by leveraged investment products rather than corporate fundamentals. The volatility has also complicated the assessment of South Korean equities, particularly as the country remains a critical supplier of AI-related semiconductor technology. South Korea's stock market has become increasingly volatile as billions of dollars in leveraged bets on the country's AI-focused chipmakers reshape trading dynamics, turning what was once considered a reliable barometer of global growth into a market driven more by speculative flows than economic fundamentals, according to a Reuters report. The sharp swings have unsettled investors and regulators alike, with market movements increasingly driven by leveraged investment products rather than corporate fundamentals. The volatility has also complicated the assessment of South Korean equities, particularly as the country remains a critical supplier of AI-related semiconductor technology. US MarketsPowered By As on 17 Jul 2026, 01:30 AM IST S&P 500 Top Gainers Abbott Laboratories98.83(10.71%) JB Hunt Transport Servs298.41(8.01%) Erie Indemnity225.94(7.49%) Cintas206.25(7.22%) Gainers" S&P 500 Top Losers Seagate Technology Hldgs745.49(-10.00%) Corning158.39(-9.19%) Western Digital466.81(-9.15%) Coterra Energy32.56(-8.62%) Losers" The benchmark KOSPI has experienced an unprecedented surge in volatility this year. More than half of all circuit breakers in the index's history -- temporary trading halts triggered when the benchmark falls more than 8% for at least one minute -- have occurred during the past six months, Reuters reported. Market strategists say traditional indicators that once guided investment decisions have become less reliable as massive capital inflows into leveraged single-stock exchange-traded funds (ETFs) dominate trading activity. These funds are heavily concentrated in AI chipmakers Samsung Electronics and SK Hynix, whose combined market capitalization now accounts for more than half of the KOSPI index. Despite their dominant market position, valuations remain subdued. Price-to-earnings ratios for Samsung Electronics and SK Hynix have fallen below five, suggesting the market is not fully reflecting future earnings expectations even as AI demand remains strong. The KOSPI has also diverged from its historical relationship with global markets. Volatility has surged after the benchmark doubled in market value within six months before retreating about 20% so far this month. The market's movements are now increasingly influencing overseas trading, including on Wall Street, rather than simply tracking U.S. benchmarks. Retail participation has played a significant role in the market's transformation. Margin loans held by South Korean retail investors stood at 34.37 trillion won ($23 billion) this week, slightly below the record 38.6 trillion won reached in June. The rally has been further amplified by concentrated positions in leveraged single-stock ETFs. Assets in a Hong Kong-listed fund offering twice the daily return of SK Hynix have surged more than twentyfold since the start of the year to $7.78 billion, making it the world's largest fund of its kind. Large rebalancing trades from these leveraged products have become substantial enough to influence prices of the underlying shares, raising concerns among global asset managers over the sustainability of the trend. South Korean regulators have begun taking steps to curb excessive speculation without triggering broader market disruption. Reuters reported that authorities have halted approvals for new single-stock leveraged ETFs and will triple the minimum cash balance required to trade such products -- including overseas-listed funds -- to 30 million won ($20,300) from August 5. Market participants largely welcomed the move, saying efforts to shift attention back toward company fundamentals could improve long-term market stability. Despite the concerns, the speculative surge has also benefited South Korea's leading semiconductor firms. Reuters reported that strong investor demand enabled SK Hynix to complete a record $26.5 billion U.S. capital raising by a foreign company last week. Global investors continue to closely monitor developments in the Korean market, viewing it as an important indicator of sentiment surrounding AI-related investments. According to Reuters, many fund managers see the potential AI bubble as one of the biggest risks facing global markets, making South Korea's experience particularly significant for investors worldwide.