South Korea’s stock market has experienced a swing from "euphoria to despair", with retail leveraged investors suffering losses of tens of billions of US dollars.

According to Reuters, South Korea’s KOSPI has dropped 30% from its June 19 peak, as the stock market frenzy driven by the AI boom and leveraged funds has swiftly turned into pessimism. The South Korean government had planned to eliminate the "Korea Discount" by introducing more investment tools and improving corporate governance, but sharp market volatility has put the effectiveness of these policies and investors’ risk tolerance under scrutiny. South Korean regulators greenlit single-stock leveraged ETFs for launch on May 27, requiring investors to complete only a one-hour training session and deposit at least 10 million won to participate. During the same period, Samsung Electronics and SK Hynix each hit a $1 trillion market cap, pushing the KOSPI to more than double its October 2023 level and cross the 8,000-point mark. Retail investors borrowed heavily to chase the AI rally, lifting the KOSPI’s margin balance to a record 29.8 trillion won on June 24, up roughly 75% year-to-date. With Samsung and SK Hynix together accounting for over 53% of the KOSPI’s total market value, related leveraged products have further amplified market swings. In early July, South Korea’s volatility index VKOSPI surged to 97.99, the highest level since the index’s launch in 2009. Citigroup estimated on July 28 that retail investors’ losses on leveraged ETFs reached $38.7 billion. The market correction has also brought social strain. A Seoul psychiatrist said the number of his patients with stock investment-related issues rose from 7 to 8 per day last year to an average of 11 per day since June this year. Busan police arrested a man in his 20s suspected of stabbing a YouTuber, who allegedly blamed the content creator for his stock losses. South Korean authorities have since tightened restrictions on individual investments in leveraged ETFs. Analysts note that the excessive volatility could also undermine South Korea’s goal of being included in the MSCI Developed Markets Index.