Foreign Capital Exodus, Retail Investor Leverage, Profit-Taking Blamed for South Korea's 'Black Monday'

BlockBeats News, June 8th. Today, the South Korean stock market continued its slump from Friday, dropping over 8% shortly after opening and halting trading after a circuit breaker was triggered. Reports indicate that South Korean exchanges held an emergency meeting on Monday to assess the intensified market turbulence and discuss measures to ensure the stable operation of the market.

Data shows that as the Kospi index hit a record high last week, foreign investors have been continuously withdrawing, with net sales of Kospi stocks exceeding $10 billion in just the past week. This selling pressure has also weighed on the Korean won, with the KRW/USD exchange rate hitting its lowest level since March 2009.

Furthermore, data from the South Korean exchanges reveals that benefiting from the AI-driven chip demand, Samsung Electronics and SK Hynix hold a combined weight of 54% in the Korea Composite Stock Price Index (KOSPI), with their daily trading volume in May accounting for about half of the index. Nearly three-quarters of KOSPI's gains this year have come from these two companies. When the benchmark index hit a record high last Tuesday, only 2.6% of stocks reached a 52-week high, while 31% hit a 52-week low.

The astonishing surge has led to a continuous increase in retail investors' leverage ratio. Kenny Kim, CEO of Meridian One Asset Management, stated, "The current market structure is susceptible to the impact of an economic downturn as it is mainly dominated by short-gamma in leveraged ETFs." However, the willingness of retail investors, once a major driving force of the market, to inject new funds has decreased. According to data from the Korea Financial Investment Association, as of May 22nd, broker deposits have decreased from 137 trillion KRW on May 12th to 121 trillion KRW (about $79 billion). Meanwhile, data from the Korea Financial Intelligence Unit (KOFIU) shows that as of May 29th, the margin balance has reached a record 38 trillion KRW, up from 27.3 trillion KRW at the end of 2025. The signal is clear: cash buffers are decreasing while active leverages are reluctant to unwind.

South Asia Securities analyst Kim Doo-yoon stated that the South Korean market faces the risk of a "Black Monday" event as "currency instability, repricing of interest rates, and profit-taking in the semiconductor industry all occur simultaneously".