Bank worker Yongjoon Kim lost 20 million Korean won ($14,000; £10,500) on the South Korean stock market last month, according to BBC News. The money was meant to help buy a home — Kim is getting married later this year — but the value of his tech investments slumped by around 25% in July.
"It's going to sting and I'm going to have to work really hard to make up for this," Kim said. "But for others who have taken more risk, they're going to feel the pain."
Kim added that many of his friends are worse off and now in a "desperate" situation after "going all in" with their savings, the BBC reported. While plenty of investors are piling into technology stocks, sharp market swings mean the bets don't always pay off, with prices often moving on every major headline, according to the BBC.
Kospi's historic correction
The Kospi, South Korea's tech-heavy benchmark, is widely regarded as the world's most volatile stock index, according to the BBC. A global frenzy around artificial intelligence has driven wild swings in the value of the country's biggest chipmakers.
Wee Khoon Chong, from financial services company BNY, said the Kospi faced "one of the sharpest corrections" in its history between June and August, comparable to the drops seen during Covid-19 and the 1997 Asian financial crisis. The index more than doubled its value since the start of the year to rise above 9,000 points in mid-June, before plunging to 5,500 within a few weeks. It has now recovered some ground to about 6,800 points, according to the BBC.
| Kospi level | Timing |
|---|---|
| Above 9,000 points | Mid-June, after more than doubling since the start of the year |
| 5,500 points | Within a few weeks after mid-June |
| About 6,800 points | At the time of the BBC report |
Chong said a key reason for the sell-off in recent weeks has been concerns over the huge amounts of money being spent on AI.
Investors' AI bets turn sour
For Woongsa Kim, a look at his shares trading app is a painful reminder of what he had made then lost by investing in the South Korean stock market. At the start of the year, he used about half of a bonus from work to buy shares in tech giant SK Hynix. The stock quadrupled in value before most of those gains were wiped out, leaving his investment, now worth about 300 million won, at roughly half the value of its peak.
"Thinking about it just brings tears to my eyes," Kim told the BBC.
Chanyong Park, who works in marketing, saw his US-listed Nvidia shares soar by more than 1,000% before he put most of the profits into SK Hynix shares. That bet went sour, according to the BBC report.
Leverage amplifies losses
The sell-off came after tech shares had soared for months, "generating the extreme euphoria" that has moved some personal investors to take out loans to invest, said investment analyst Tobias Reger.
By the end of July, an estimated 1.2 million South Korean personal investor accounts had faced margin calls, equivalent to about one in every 30 working-age adults in the country, the BBC reported.
Leveraged trading is a growing trend among personal investors that has also picked up in markets like Taiwan and the US, said Frank Benzimra, head of Asia equity strategy at financial services group Societe Generale. That has raised the risks around AI-related stocks, he added.
The scale of the market reversal
The Kospi's round-trip from above 9,000 points to 5,500 and back to about 6,800 points illustrates the volatility that has earned the index its reputation as the world's most volatile stock index, according to the BBC. The correction, which BNY's Wee Khoon Chong compared to the Covid-19 shock and the 1997 Asian financial crisis, and the wave of margin calls hitting one in 30 working-age adults underscore how quickly leveraged positions can unwind in the Korean market, according to the analysts cited in the report.
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