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"AI Demand to Remain Robust... Structural Drivers Increasing Market Volatility Need Review"

Kim Yongbeom, Policy Chief at the Blue House, stated that the government does not see the current situation as requiring separate "stock market stabilization measures" in response to the recent sharp downturn in Korea's stock market. However, he emphasized the need for a comprehensive review of structural factors that amplify market volatility, such as the high proportion of individual investors, leveraged exchange-traded funds (ETFs), derivatives, and the market concentration in large semiconductor stocks.

Policy Chief Kim Yongbeom is giving a preliminary briefing on the US and South America tour at the Blue House Chunuchugwan press conference hall on the 22nd. July 22, 2026 [Photo by Blue House Press Photographers] Yonhap News

Speaking at a press briefing held at the Press Center in São Paulo, Brazil, on the 28th (local time), Kim was asked about potential stabilization measures, and responded, "I do not believe this is a situation that requires 'stock market stabilization measures' per se," diagnosing the recent market correction as a process where the market is reassessing the sustainability of growth and large-scale investment in the artificial intelligence (AI) industry. He added, "I believe the demand for AI semiconductors will remain solid," characterizing the current market movement as a process of seeking balance in the long-term growth path of the AI and semiconductor industries. As of Korea time, the KOSPI closed at 6,023.66, down more than 10% from the previous trading day.

Kim also remarked, "The AI revolution is real, and at this point, we do not doubt it," but pointed out that while Big Tech companies are pouring massive amounts of money into models, cloud, and data centers for fear of falling behind in the early AI race, "there remains uncertainty as to whether a market will actually form where these investments will generate significant revenue." He continued, "I believe the market is internally debating the future of the AI revolution and semiconductors."

The rise of Chinese semiconductor companies was also cited as a factor driving recent volatility in the Korean stock market. Citing the listing of Changxin Memory Technologies (CXMT) and advances in China's photolithography equipment technology, Kim analyzed, "The market is revisiting whether Korean memory companies' competitive edge can be sustained." He compared the current impact to the so-called "DeepSiC Shock," when Chinese AI models shook the market in the past, adding, "If anything, this shock has served as a reminder that companies— including the two memory giants—need to be even more focused on building factories, investing, and conducting R&D."

Regarding the relatively larger decline in Korea's stock market, Kim pointed to the distinctive structure of the Korean capital market. He explained that the high proportion of individual investors, active derivatives trading, and the heavy representation of semiconductor companies like Samsung Electronics and SK hynix in the market can collectively cause greater volatility in Korea than overseas.

Kim, however, drew a line regarding leveraged ETFs—identified as a major cause of the recent market downturn—saying, "There is a tendency to attribute many problems solely to that one factor, but that is not necessarily the case." He explained that increased market volatility can occur not only during time periods when supply-demand adjustments for leveraged ETFs are heavily concentrated, but also from the early trading session, emphasizing, "Not everything stems from leveraged ETFs."

He stressed that even if the Financial Services Commission (FSC) further supplements the leveraged ETF system, it is essential to examine the structural characteristics of the domestic market as a whole—its individual investor focus, derivatives trading, and the concentration in semiconductor stocks. Kim concluded, "Debates surrounding AI and semiconductors may occur again in the future," adding, "Authorities such as the FSC and the Financial Supervisory Service must comprehensively review not only leveraged ETFs but also all factors amplifying volatility in the domestic securities market."

In response to a question about whether President Lee Jaemyung had given any special directives or made remarks about the market situation during his overseas trip, Kim replied, "The President's schedule is extremely busy at this stage and he has not made any comments about the market situation."

This content was produced with the assistance of AI translation services.