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

June 8. Today, South Korea’s stock market extended its Friday slump, falling over 8% right after opening before trading was halted by a circuit breaker. South Korean exchanges held an emergency meeting Monday to review the sharp market turbulence and discuss steps to keep the market stable, reports noted. Data shows that after the Kospi hit a record high last week, foreign investors have pulled out nonstop—net selling of Kospi stocks topped $10 billion in just the past week. That selling pressure also weighed on the Korean won, pushing the KRW/USD exchange rate to its lowest point since March 2009. South Korean exchange data adds that driven by AI-fueled chip demand, Samsung Electronics and SK Hynix make up a combined 54% of the Korea Composite Stock Price Index (KOSPI), and their daily trading volume in May accounts for roughly half of the index’s total. Nearly three-quarters of the Kospi’s gains this year came from these two firms. When the benchmark index hit a record high last Tuesday, only 2.6% of stocks hit a 52-week high, while 31% hit a 52-week low. This wild surge has kept pushing retail investors’ leverage ratio up. Kenny Kim, CEO of Meridian One Asset Management, stated, “The current market structure is vulnerable to an economic downturn, as it’s heavily influenced by short-gamma leveraged ETFs.” But retail investors—once a key market driver—are less willing to put in new cash. Data from the Korea Financial Investment Association shows that as of May 22, broker deposits dropped from 137 trillion won on May 12 to 121 trillion won (around $79 billion). Meanwhile, Korea Financial Intelligence Unit (KOFIU) data shows margin balances hit a record 38 trillion won as of May 29, up from 27.3 trillion won at the end of 2025. “The signal is clear: cash buffers are shrinking, and active leverage isn’t being unwound,” Kim added. South Asia Securities analyst Kim Doo-yoon warned that South Korea’s market faces a risk of a “Black Monday” event, as “currency instability, interest rate repricing, and semiconductor profit-taking are all unfolding at the same time.”