South Korean stocks recorded a second consecutive session of declines, with the Seoul capital market losing approximately $2.18 trillion in value. The selling pressure that started on Tuesday carried into Wednesday, putting the market on track for its worst monthly drop on record.
Investors suffered losses following a sudden sell-off, driven primarily by fading enthusiasm for chip stocks — which had surged on AI investment. South Korean Vice Finance Minister Koo Yun-cheol apologized before parliament for introducing single-stock levered ETFs, acknowledging they had not been adequately reviewed.
The KOSPI .KS11 at one point dropped as much as 12.6% before paring losses to close 6% lower, extending Tuesday's nearly 11% plunge. The rout has wiped out nearly 40% of the index's value since its peak just over a month ago.
South Korea's government is considering market stabilization measures, including tighter regulation of levered ETFs that some experts say have fueled margin trading. Following an emergency meeting on Wednesday, the finance ministry said it would further tighten single-stock levered products, including a cap of 20% of total investment value on such positions, higher transaction costs, and simulation requirements.
Despite the steep decline, the KOSPI has still gained 41.5% in dollar terms since the start of the year, making it the best-performing major market in 2023.
