KOSPI Falls Below 6000 Again... Records Largest Ever Monthly Drop

Concerns Over AI Peak-Out and "Memory Assault" from China
Individual Investors Continue Leveraged Bets... Volatility Remains
ETF Net Assets Drop from 500 Trillion Won on the 1st to 418 Trillion on the 28th

On the 29th, the KOSPI index started the session at 6,089.11, up 65.45 points from the previous trading day. The electronic board in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul, displayed the status of the domestic stock market. July 29, 2026. Photo by Kang Jinhyung

The collapse of the KOSPI 6000 mark during intraday trading has continued for a second day, as concerns over an artificial intelligence (AI) “peak-out” and intensifying competition from Chinese memory semiconductor makers weigh on the market. With growing skepticism among investors about the outlook for the semiconductor sector, analysts widely expect it will take time for a full-fledged rebound to materialize. Anxiety over speculative trading remains high as individual investors concentrate on leveraged exchange-traded funds (ETFs).

KOSPI Posts the Largest Ever Monthly Decline

As of 10:19 a.m. on July 29, the KOSPI was trading at 5,929.35, down 1.57% from the previous trading day. The KOSPI opened more than 1% higher but soon gave back all its early gains. The KOSDAQ was also down sharply; it was trading at 683.31 as of 10:20 a.m., plunging 3.19% from the previous day.

The KOSPI recorded the steepest monthly decline in its history. According to the Korea Exchange, as of the previous day, the KOSPI had dropped 28.9% this month. This surpasses the former record monthly drop of negative 27% in October 1997. The domestic stock market has thus fallen even more so this month than during the International Monetary Fund (IMF) bailout crisis. Even during the global financial crisis in October 2008, the decline was 23.1%.

The KOSPI’s sharp decline is the result of overlapping concerns about an “AI semiconductor peak-out,” as well as worries about a breakdown of the memory semiconductor oligopoly following the listing of China’s Changxin Memory Technologies (CXMT). There is growing skepticism in the market regarding the growth prospects of the AI industry. A notable recent example is Alphabet: despite announcing strong second quarter results on July 22, its share price dropped around 7%. The company’s capital expenditures (CAPEX) have surged along with expanding investment, causing its second quarter free cash flow (FCF) to swing to a deficit of $5.9 billion. As FCF turned negative for the first time since Alphabet’s IPO in 2004, the market reacted with disappointment.

Tesla also saw its FCF turn negative in the same quarter as investments expanded, causing its shares to plunge. The previous day, the successful listing of CXMT and news that Chinese companies had developed cutting-edge semiconductor equipment such as deep ultraviolet (DUV) lithography tools further fueled the sell-off in AI-related stocks.

The semiconductor sector weakness has also extended to the New York stock market. Overnight, the Nasdaq Composite Index closed down 0.22% from the previous session. Shares of Micron (-8.85%), AMD (-8.15%), Intel (-5.86%), Qualcomm (-4.21%), and Western Digital (-6.91%) all plummeted. The Philadelphia Semiconductor Index tumbled 4.49%, marking its fourth consecutive day of losses. SK hynix ADR (American Depositary Receipt) also dropped 8.98%. SK hynix ADR, which has now fallen sharply for three consecutive sessions, is down about 13% from its offering price of $149.

Seokhwan Kim, a researcher at Mirae Asset Securities, commented, “The KOSPI started with a rebound led by semiconductors, reflecting perceptions that the decline was excessive, but volatility has increased and a severe price correction is continuing, particularly in semiconductors.” Ji-Young Han, a researcher at Kiwoom Securities, argued, “The July KOSPI drop is the highest ever monthly decline, suggesting the market is deeply oversold. Although there are concerns about a memory semiconductor peak-out, expanded competition in China, and potential U.S. rate hikes, these remain latent risks, so the current drop appears excessive.”

SK hynix, which announced second quarter results that fell short of market expectations, is leading the decline in the KOSPI. As of 10:22 a.m., SK hynix was trading at 1,495,000 won, down 3.55% from the previous day. The company reported second quarter operating profit of 60.5426 trillion won, missing the market consensus of 64.6755 trillion won compiled by FnGuide. Other major semiconductor stocks such as SK Square (-1.51%) and Samsung Electro-Mechanics (-1.26%) were also down. However, Samsung Electronics was trading 2.05% higher at 2,245,000 won.

Brokerage reports have come out lowering target prices for Samsung Electronics and SK hynix. Mirae Asset Securities cut its target prices for Samsung Electronics and SK hynix to 3,700,000 won and 28,000,000 won, respectively, from the previous 5,500,000 won and 42,000,000 won—each slashed by 33%. Younggun Kim, a researcher at Mirae Asset Securities, explained, “We initially expected the downtrend in share prices from the lower NAND contract price outlook to be finished, but the immediate emergence of the issue surrounding China’s domestic DUV production triggered further falls. While the average selling price (ASP) for memory semiconductors is forecast to continue rising next year, the pace of the increase is inevitably expected to be more moderate than this year.”

Retail Investors Continue Speculative Trading

The concentrated trading by retail investors in leveraged and inverse ETFs tracking Samsung Electronics and SK hynix, even during the market crash, is raising further concerns. The most net purchased stock by individuals the previous day was “KODEX SK hynix Single Stock Leverage,” which attracted inflows of 420 billion won despite plunging 28.43% in a day. Retail investors also bought a net 142.3 billion won of “TIGER SK hynix Single Stock Leverage” (-28.11%) and 90.2 billion won of “KODEX Samsung Electronics Single Stock Leverage” (-26.63%).

Conversely, investors rushed to book profits in inverse products that rise by twice the amount of the day’s decline. “SOL SK hynix Futures Single Stock Inverse 2X” jumped 29.10% that day, but individuals sold off 32.9 billion won, making it the most net sold ETF among retail investors. “PLUS Samsung Electronics Futures Single Stock Inverse 2X” (26.86%) also saw strong performance, but individuals still made a net sale of 11.3 billion won.

This market action reflects both a learning effect—where investors expect sharp declines to be followed by rebounds—and anticipation for the earnings release by SK hynix. Yongsoo Nam, head of the ETF Division at Korea Investment Management, explained, “Given the recent high volatility, it has become common for large swings to be followed by rebounds the next day, so I believe this is a result of that learning effect. There is also some expectation about SK hynix’s earnings announcement.” Indeed, as SK hynix’s earnings were released in the morning, the single stock leveraged funds soared by over 10% at one point.

Beyond leveraged products, even semiconductor-themed ETFs are now seeing drops in returns. Most semiconductor ETFs have heavy weightings in Samsung Electronics and SK hynix. According to the Korea Exchange, all of the top-performing ETFs in terms of declines the previous day (excluding leverage/inverse funds) were semiconductor and AI-themed products. “IBK K-AI Semiconductor Core Tech” fell the most, dropping 15.10%, followed by “TIGER AI Semiconductor Core Process” (-15.02%) and “SOL AI Semiconductor TOP2 Plus” (-14.86%). “SOL AI Semiconductor TOP2 Plus”—which allocates 25.45% to Samsung Electronics and 24.30% to SK hynix, meaning the two giants make up about half of the fund’s holdings—was highly popular when it launched.

The total assets under management (AUM) of ETFs, which had ballooned on the back of a historic boom, are now shrinking. As of July 1, the total AUM for Korean-listed ETFs had exceeded 500 trillion won, but by the previous day it had dropped to 418 trillion won. Over the past week alone, 2.947 trillion won was wiped off from “KODEX 200,” which tracks the KOSPI 200 Index, and 1.7928 trillion won flowed out from “TIGER Semiconductor TOP10.” “SOL AI Semiconductor TOP2 Plus” also saw its AUM decrease by 1.1807 trillion won. After surpassing 7 trillion won in June, its AUM plunged to 4.6921 trillion won as of the previous day.

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