South Korea's share market losses deepen as leveraged AI bets take a heavy toll

SAMSUNG BIOLOGICS

20/07/2026 04:19

KOSPI falls 4.7%, foreigners net sellers
Sidecar triggered on KOSPI, Kosdaq
SK Hynix, Samsung Electronics down 6%
Hyundai down 7% to mid-Jan lows
South Korea benchmark bond yield flat
Updates to mid-day trades

    SEOUL, July 20 (Reuters) - South Korean shares fell nearly 5% on Monday, triggering market-wide trading curbs as investors unwound AI-linked trades, extending a bruising correction that has wiped out more than a quarter of the KOSPI's value since its June peak.

    The selloff highlighted mounting investor anxiety over a market increasingly driven by 
    leveraged bets on AI chipmakers
    . Once a peripheral market for global investors, South Korea has become a key barometer of enthusiasm for the AI boom, and is now feeling the downside as sentiment turns.
  

        The benchmark KOSPI .KS11 fell as much as 4.7% as traders returned after a long weekend. It was trading down 3.8% at 6,565 points as of 0240 GMT. The chipmaker-heavy gauge has now fallen 28% from its June 22 record-high, extending a four-week losing streak that has brought a dramatic halt to this year's historic rally.

        A sidecar trading curb was triggered on both the KOSPI and the junior Kosdaq .KQ11 indexes, halting programme trading for five minutes.

    Volatility has been amplified by heavy inflows into 
    single-stock leveraged funds
    , which have drawn waves of retail investors while leaving them exposed to outsized losses when momentum reverses.
  

    Citi on Sunday 
    cut its recommendation on South Korea
     to a tactical neutral from overweight after keeping the market in its preferred category for a year, citing heightened volatility rather than any deterioration in fundamentals.
  
"While Korea still screens as the top market in our allocation model, we downgrade to neutral on a tactical basis given ongoing volatility," said Citi analysts, who maintain a KOSPI target of 10,000.

    That represents a gain of about 50% from current levels.
  
Markets were also on edge as an escalating conflict in the Gulf lifted oil prices and reignited inflation concerns. A packed week of major tech earnings is expected to further test investor faith in the AI trade. MKTS/GLOB
Shares of SK Hynix 000660.KS, the world's leading AI memory chipmaker, and those of its rival Samsung Electronics 005930.KS, fell nearly 6% each. The two stocks make up just over half of the benchmark KOSPI gauge.
Hyundai Motor 005380.KS tumbled 7% to its lowest since mid-January this year as a union began a four-hour strike. Sister automaker Kia Corp's 000270.KS shares also fell 7.5%.
Market breadth was overwhelmingly negative, with 778 stocks falling versus 114 gainers among 912 traded issues. Foreign investors were net buyers of 415.1 billion won ($280.3 million) worth of shares.
In the currency market, the won was fetching 1,481.1 per dollar on the onshore settlement platform KRW=KFTC, 0.33% higher than its previous close at 1,486.0.
The most liquid three-year Korean treasury bond yield KR3YT=RR rose by 5.8 basis points to 3.910%, while the benchmark 10-year yield KR10YT=RR rose by 4.7 basis points to 4.341%.


($1 = 1,480.9000 won)

 (Reporting by Sameer Manekar in Bengaluru and Cynthia Kim in Seoul; Editing by Sherry Jacob-Phillips and Shri Navaratnam)
 ((Cynthia.Kim@thomsonreuters.com; 822 3704 5655; Reuters Messaging: cynthia.kim.thomsonreuters.com@reuters.net))