Kospi posts world’s worst performance amid AI slowdown fears, leveraged selling

Korea’s benchmark Kospi has tumbled nearly 30 percent over the past month, making it the worst-performing major stock market globally.

Having once broken the 9,000 mark just a month ago, analysts say the benchmark could slide back into the low-6,000 range as leveraged investment products fuel further selling and fading confidence in chip stocks weighs on the market.

The Kospi closed at 6,516.27 on Monday, down 304.33 points, or 4.46 percent, from the previous session, according to the Korea Exchange.

Monday's bloodletting followed a sharp sell-off on Wall Street on Friday after Chinese AI startup Moonshot AI unveiled its latest model, Kimi K3, which revived concerns reminiscent of the so-called DeepSeek shock earlier this year.

As the market plunged, Korea activated sell-side sidecars — temporary curbs on program trading — on both the Kospi and the tech-heavy Kosdaq.

Chip stocks led the broad-based rout.

Samsung Electronics fell 4.31 percent to close at 244,000 won ($165), marking its first finish below 250,000 won since May 4, when it closed at 232,500 won. SK hynix also dropped 4.23 percent to 1.76 million won.

The Kospi's recent underperformance stands out even against other major global markets.

Between June 19 and Monday, the Kospi had lost 28.02 percent, the steepest decline among 46 major markets, including Group of 20 and Organisation for Economic Cooperation and Development economies.

Compared to its intraday record high of 9,385.59, the benchmark has fallen 30.57 percent.

Over the same period, the S&P 500 slipped just 0.57 percent. Other major Asian markets also weakened, with Taiwan's Taiex down 8.17 percent, Japan's Nikkei 225 down 9.98 percent and China's Shanghai Composite down 7.98 percent — yet none matched the Kospi's decline.

The Kospi also posted a steeper decline than Russia's RTS index, which fell 24.21 percent after lower oil prices dragged it to its lowest level in three years and four months.

Despite its recent slump, the Kospi remains one of the world's best-performing major stock indexes when compared to last year. Since the end of last year, the index has risen 54.63 percent, compared to gains of 17.4 percent for the S&P 500 and 26.7 percent for the Nikkei 225.

The market's steep first-half rally undoubtedly encouraged investors to take profits. Yet analysts say the magnitude of the fluctuation cannot be explained by profit-taking alone. They attribute the sell-off to mounting concerns over a slowdown in global AI investment and selling pressure amplified by leveraged investment products.

Historic volatility and heavy selling in Korean equities appeared to reflect the growing influence of domestic retail investors using high-risk leverage, Reuters reported on Thursday. The news agency added that a sustained period of market turmoil would make it difficult for foreign investors to return.

Brokerages expect volatility to remain elevated in the near term.

"The market's underlying strength is weakening as investors cash in profits following the Kospi's exceptional first-half rally, while selling pressure from leveraged products has triggered a cascade of declines," Han Ji-young, an analyst at Kiwoom Securities, said. "The Kospi is likely to find footing in the low-to-mid-6,000 range."

Others believe the market has little room to fall further, as valuations have already reached historically low levels.

"The Kospi's 12-month forward price-to-earnings ratio has fallen to just 5.81, reaching a historically low valuation range," said Lee Kyoung-min, a researcher at Daishin Securities. "Because the Kospi entered its adjustment period ahead of other global markets, it also has a strong chance of being among the first to escape the fall."

BY JANG SEO-YUN [[email protected]]