South Korea’s Kospi Led Global Stocks And Hit an All-Time High Just Weeks Ago. Then It Went Into Bear Territory
South Korea‘s benchmark Kospi stock market index has tumbled into bear-market territory just weeks after reaching a record high and taking the title of the best-performing market of the year.
The Kospi fell more than 5% on Wednesday, leaving the index more than 20% below its June 19 all-time high. Although the benchmark recovered slightly in volatile trading on Thursday, the decline marked a dramatic reversal for what had been the world’s best-performing major stock market earlier this year.
“South Korea’s recent drawdown has been driven by heightened AI skepticism on the part of global investors, coupled with extreme market concentration,” Manishi Raychaudhuri, chief executive officer of Emmer Capital, told CNBC.
The country’s stock market has become increasingly dependent on its two semiconductor giants, Samsung Electronics and SK Hynix. The pair accounted for more than half of the Kospi’s weighting as of June, making the benchmark particularly vulnerable to swings in investor sentiment toward artificial intelligence and memory chip companies.
That concentration helped propel the Kospi to record levels during the AI boom, but it has also magnified the recent correction as investors reassessed valuations following a powerful rally.
Jung In Yun, founder of Fibonacci Asset Management Global, said the decline reflects positioning rather than deteriorating business fundamentals. “Korean equities had become one of the most crowded AI trades globally after a very strong rally, so it did not take much to trigger profit taking,” Jung said. He added that rising global uncertainty and expectations that earnings growth could moderate have also contributed to more cautious investor behavior.
Despite the sharp decline, Jung described the correction as “a healthy reset rather than a fundamental change in the outlook.” The recent volatility has occurred even as South Korea’s largest technology companies continue to report strong financial results.
Samsung Electronics posted stronger-than-expected quarterly earnings this week, while demand for memory chips remains robust, driven by the continued expansion of artificial intelligence infrastructure.
Nevertheless, Samsung shares declined after investors questioned whether the pace of AI-related spending can continue indefinitely. “The market is questioning the pace of earnings growth rather than the sustainability of AI demand itself,” Jung said. “This distinction is important because it suggests we are seeing a valuation adjustment rather than the end of the AI cycle.”
Peter Kim, global investment strategist at KB Financial Group, said retail investors, leveraged exchange-traded funds, and algorithm-driven trading have amplified market swings. “The gamification of finance has led to such gyrations driven less by fundamentals but by news flows and fads,” Kim told CNBC.
According to Kim, daily moves of between 5% and 10% have become increasingly common as capital rapidly rotates between sectors. The Kospi Volatility Index has surged more than 200% since the beginning of the year, highlighting the heightened uncertainty.
Even after entering bear market territory, however, the Kospi remains one of the world’s strongest-performing major indexes. The benchmark is still up more than 70% in 2026 after gaining over 75% in 2025, reflecting the extraordinary rally powered by AI-related semiconductor stocks.
Looking ahead, analysts believe upcoming corporate updates could help stabilize sentiment. Bulk said SK Hynix’s U.S. stock market listing later this week could provide additional support for memory stocks by broadening the company’s investor base. He also pointed to second-quarter earnings reports from both SK Hynix and Samsung Electronics later this month as important catalysts.
