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FIFA World Cup Exit Day 15 Sees South Korea Stock Crash

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Concerns about AI hashpower surplus, Nasdaq ADR listing dilution, and domestic leveraged ETF amplifying volatility have collectively intensified selling pressure in the market.

Original Title: "On the 15th Day of the World Cup Elimination, South Korea's National Destiny Stock Collapsed"

June 25th may be the most memorable day for South Koreans in 2026.

That night, at the Monterrey Stadium, the South Korean team only needed a draw against South Africa to advance, but lost 0-1. Son Heung-min came on as a substitute and had 29 touches throughout the game.

Three days later, the DR Congo scored three consecutive goals to come from behind and defeat Uzbekistan. After 71 hours of anxious wait, the South Korean team was squeezed out of the Round of 32. The 12th World Cup journey in the team's history ended in an almost shameful manner.

Also on June 25th, SK Hynix's stock price surged to a historic high. The national pride taken away by football was reciprocated in storage. No one expected that this day would mark the end of South Korean football and also the peak of SK's stock price curve.

18 trading days later, today, July 13th, at 9:35 am, the South Korean exchange platform initiated a circuit breaker, and the KOSPI intraday decline expanded to 6%. SK Hynix plummeted by as much as 12%, falling below the key level of 2 million Korean won, hitting a new low since June 11th, retracting 33% from the historical high on June 25th.

The Hong Kong-listed double leverage Hynix ETF plummeted over 22% in a single day.

This summer, the true national team of South Korea collapsed even faster than the football team.

From Crowning to Collapse, It Only Took Three Weeks

To understand the intensity of this decline, one must first understand the prior frenzy of the rise.

In the past 12 months, SK Hynix's stock listed in Seoul has risen by approximately 850%, with a market capitalization exceeding $1 trillion.

On June 22nd, it reached a historic closing high, surpassing Samsung Electronics in market value, ending the latter's decades-long reign as the market cap king of Korea. Holding over 56% of the global HBM market share, exclusively supplying about 70% of NVIDIA's new generation AI server HBM orders, with long-term contracts extending to 2028, a first-quarter operating profit margin of 72%, higher than NVIDIA.

The capital market couldn't find a more pure AI storage target than it, and South Korea couldn't find a more proud national emblem than it.

There is a shared story circulating on Zhihu (a Chinese Q&A website) about a young person in Seoul. In essence, it says: this is her best summer since adulthood. She found a job this year, invested her entire salary in the stock market, earned five years' worth of salary, and walked the streets of Seoul with a feeling of being in a human golden age.

The Golden Age illusion lasted for less than a month.

The news of Meta's plan to sell AI computing power to the outside world came in early July, and the buyer's interpretation was straightforward: a super-scale manufacturer was starting to sell "excess computing power," indicating a possible market overbuild. Morgan Stanley's chief U.S. stock strategist promptly recommended reducing semiconductor holdings, and the Philadelphia Semiconductor Index has fallen by over 13% since July. The news reached Seoul on the first trading day, with the KOSPI plunging by nearly 8%, SK Hynix dropping over 12% in a single day, causing a market capitalization loss of over one trillion dollars.

Over the next two weeks, this market entered a frenzy:

1. On July 3, a sharp V-shaped rebound saw the KOSPI rise by over 5%, triggering a circuit breaker and suspending programmatic buying;

2. On July 7 and 8, the market experienced two consecutive days of circuit breaker-triggered declines, with the July 8 closing price retracing over 20% from the June 19 high, officially entering a technical bear market.

SK Hynix has had over 50 trading days this year with daily price fluctuations exceeding 5%, compared to 37 such days for the entire previous year.

Both rises and falls have triggered circuit breakers. The number of circuit breakers and sidecar mechanism activations in the first half of this year in the South Korean stock market has surpassed the historical record set during the 2008 financial crisis.

The most illustrative day was July 7.

On that day, Samsung Electronics released its second-quarter earnings preview, reporting an operating profit of 89.4 trillion Korean won, a year-on-year surge of 1810%, surpassing market estimates and even exceeding its full-year 2025 profit projection.

The historically strong quarterly performance led to a sharp drop in stock prices and a market circuit breaker trigger.

When a stock price overvalues the current earnings by a wide margin, even a stellar performance constitutes an answer to the previous exam. The market is now holding a new exam paper that asks different questions: Is AI infrastructure overheating, and can the massive capital expenditures of chip factories still pay off?

Nasdaq's Champagne, Seoul's Bill

During the same week when the Seoul market entered a bear market, SK Hynix achieved a milestone event in the capital markets in New York.

On July 10, SK Hynix's ADR debuted on the Nasdaq at an offering price of $149, raising $26.5 billion, surpassing Alibaba's 2014 record and became the largest foreign company IPO in the U.S., second only to last month's SpaceX as the second-largest stock offering in U.S. history.

Oversubscribed more than 7 times, with participation from over 500 institutions. The opening price on the listing day was $170, reaching a high of $177 intraday, closing at $168.01, marking a nearly 13% increase on the first day. With a market capitalization of approximately $1.22 trillion at the closing price, the company surpassed Micron in one fell swoop, claiming the throne of the global memory chip market value. During the bell-ringing ceremony, CEO Lu Zhengyin warned that the global memory industry is heading towards the most severe supply shortage in history by 2027, while Cui Taiyuan stated that future demand will experience exponential growth.

Celebrating with champagne in New York, sending the bill back to Seoul.

This victory has been bleeding the domestic market since the preparation day. The IPO's target price was initially set at a closing price of 2,555,000 Korean won on June 23. However, the stock price kept declining, forcing a downward revision of the target price to 2,425,000 won on July 3, reducing the fundraising size by approximately $1 billion. Every bearish candle during the pricing window was discounting the Nasdaq's pricing orders.

The addition of 17.79 million new common shares was a tangible dilution, with the new shares scheduled to start trading on the Seoul exchange on July 29.

According to Reuters, the company plans to gradually repatriate over $20 billion in fundraising back to Korea around July 15, driving a demand for several billion dollars in foreign exchange towards the forex market, which has already plummeted to 1,528 won per US dollar. Due to restrictions on Korean common shares converting to ADRs, the US stock ADR is currently trading at a premium of about 17% to the Seoul stock price. This inverted spread reflects a mirror where the same asset receives vastly different treatments in two markets: global funds rush to pay a premium for scarcity in New York, while holders in Seoul face liquidity discounts and leveraged liquidation.

The final match that ignited this morning's sell-off came from a performance outlook by the Korean local brokerage firm KIS.

The report forecasts SK Hynix's second-quarter operating profit to be 60.4 trillion Korean won, a staggering 556% year-on-year surge but approximately 8% lower than the market's consensus expectation of 65 trillion won. The reason lies in the pricing structure: HBM is locked in at a fixed price through long-term supply agreements and does not follow the market prices in the short term. While the average spot prices of general DRAM and NAND surged by about 30% and 50% respectively in the second quarter, Hynix, with the highest proportion of HBM, turned out to be the least beneficiary of this price hike. Its major moat became a drag on the average price for this quarter.

Growing by 556%, dropping by 12%. At the peak of the stock price, being good is never enough; what's more fatal than being bad is being not good enough. The market always demands something better than imagination.

Ants, Leverage, and an Out-of-Control Amplifier

The same AI callback, why did it become a chain reaction in South Korea? To answer this question, you need to look at the market's framework.

The KOSPI has over 800 component stocks, with Samsung Electronics and SK Hynix accounting for over 43% of the index weight.

In May of this year, South Korea allowed single-stock leveraged ETFs, after which these two stocks and their derivatives temporarily occupied 84% of the trading volume in the South Korean stock market.

The South East Eminence fund, which was leveraged two times long on Hynix, once had an asset size exceeding $16 billion, with a year-to-date surge of over 1000%, making it the world's largest product of its kind. Some institutions estimate that for every 1% market fluctuation, South Korea-related leveraged ETFs will generate approximately $9 billion in mechanical rebalancing demand. These products rebalance daily, requiring more selling of positions during a decline; the further it falls, the harder it sells. Around July 2nd, leveraged products linked to Hynix accounted for the majority of forced liquidation trades in the stock market.

Over the past month, over 90% of Hynix leveraged ETF investors have been in a loss-making position.

On the other end of the leverage are retail investors.

By the end of May, South Korea's margin financing balance exceeded ₩38 trillion, hitting a historical high. Since the beginning of this year, foreign funds have been net selling about $95 billion in South Korean stocks, with continuous net selling for 13 trading days starting from the peak on June 19th, and a single-day sell-off of ₩3.73 trillion on July 7th; during the same period, retail investors, known as "ants," had a net buy of around $80 billion, nearly absorbing all the selling.

Institutions are orderly retreating at the top while retail investors are leveraging up in a contrarian manner, placing their bets on national industries as a form of faith. During the upswing, national prosperity and leverage boost each other; during the downturn, they trample on each other, with no buffer in between.

However, the bullish card is still on the table.

In the same report, KIS maintains a buy rating with a target price of ₩3.8 million, reasoning that after the industry transitions to a 3-5 year long-term contract structure, the valuation anchor will shift from quarterly average price increases to how long high profitability can be sustained; Quo Lu Zheng is betting on a shortage lasting beyond 2030.

The bears are looking at a different set of logic: Samsung and SK Hynix are expected to invest over ₩100 trillion in the next ten years, the South Korean government is building four more chip plants, Micron is also expanding production, the oligarchs are dismantling the supply discipline that supported this profit bonanza, and the low P/E ratio of cyclical stocks has historically been most common at profit peaks.

The disagreement is not about the life or death of companies but about the cyclical coordinates. Whether the KOSPI at 7200 points and Hynix dropping by a third is a deep breath in a super cycle or the last look back on the edge of the rooftop depends on how long the AI capital expenditure engine can roar.

Out of the World Cup, the South Koreans have accepted it in just three days.

The national fate did not give them this opportunity. The day after tomorrow, over $20 billion will start to flow through foreign exchange; by the end of the month, 17.79 million shares will be listed on the Seoul stock exchange. Having already poured $80 billion into the market earlier this year, can the ants catch the next wave?