South Korea’s stock market just had the worst month in its history. The KOSPI index fell approximately 23% in July 2026, wiping out roughly ₩250 trillion in market capitalization and triggering a record number of circuit breakers along the way.

How the collapse unfolded

The KOSPI peaked at 9,114 in June 2026, riding a wave of AI and semiconductor euphoria that had propelled South Korean tech giants to historic valuations.

By early July, the index had already slipped below 8,000 points.

On July 7, the sixth circuit breaker of 2026 was triggered as selling accelerated. Circuit breakers are automatic trading halts designed to prevent panic selling from spiraling out of control. South Korea’s version kicks in when the KOSPI drops more than a set percentage from the previous close.

Six days later, on July 13, things got worse. The KOSPI closed at 6,806.93, down 8.95% in a single session, triggering the seventh circuit breaker of the year. By mid-month, the index was trading in a range of 6,500 to 7,200 points, representing a decline of more than 20% from its June peak.

Some reports put the total drawdown at over 31% from peak to trough.

Samsung Electronics and SK Hynix, the two heavyweights that dominate the KOSPI’s market cap, were ground zero for the carnage. Both stocks regularly posted single-day declines in the 9% to 12% range during the heaviest selloffs.

What triggered the meltdown

The proximate cause was a sudden reassessment of AI chip demand sustainability. For months, markets had priced in an almost limitless appetite for semiconductors driven by the global AI buildout. When cracks appeared in that narrative, the reversal was brutal.

Foreign investors and institutional players added fuel to the fire with sustained selling pressure throughout the month. The dynamics of leveraged ETFs, which had become increasingly popular among Korean retail investors during the rally, amplified the downturn. When leveraged products need to rebalance into a falling market, they mechanically sell more, creating a feedback loop that pushes prices even lower.

The seven circuit breaker activations by mid-July exceeded the total number triggered in most previous full calendar years.

The global context matters

South Korea’s stock market has long been considered a bellwether for global technology demand, given the country’s outsized role in semiconductor manufacturing. Samsung and SK Hynix together produce a massive share of the world’s memory chips, so when their stocks crater, it sends a signal far beyond Seoul.

What this means for investors

The leveraged ETF dimension deserves particular attention. Regulators worldwide have been watching the explosive growth of leveraged and inverse ETF products with increasing concern. Seven circuit breakers in half a month is exactly the kind of outcome that prompts regulatory action.