When markets are surging with euphoria, there’s never any problem. But when exposed to volatility on the opposite end that causes sharp losses, suddenly it’s an issue. Boohoo.
In the run from April to the peak in June, South Korea’s benchmark KOSPI index gained by a whopping 85%. Since then, the AI trade went bust and that has brought about heavy declines in the past five weeks. The negative streak is extending to this week too with the KOSPI at one point even being down near 13% earlier today after the over 10% drop yesterday. But towards the close, we saw losses pared somewhat to salvage a drop of just 6% by the time the closing bell struck.
So after the 85% run higher in about 10 weeks with no complaints, we’re seeing a 40% drop now in about 6 weeks and suddenly panic is ensuing. Pfft.
For some context, the KOSPI is still trading up by some 34% this year despite the 33% drop so far in July. Sure, the massive volatility swing is definitely not welcome but how can lawmakers and policymakers not see it being a problem when markets become so overleveraged on the way up?
Did they really think that the stock market surging by over 120% in six months is normal? Even the 75% gains in 2025 alone should have served as a warning sign on the kind of leverage and speculation that is being pumped into the market.
Yes, it’s easy to say now in hindsight but any experienced trader/investor will tell you that there is nothing normal about that. And if you are going to play that game, you better be well prepared to handle the risks associated. That being if markets can swing 30-40% one way in a matter of weeks, they can also do the same on the other side when it is time to pay the piper.
Markets never move in a straight line and unfortunately, there will be a lot of people burned by the latest drop here in having to learn that lesson.
For South Korean authorities, I’m not even sure what is there to discuss. They are the ones who built the setting for the insane retail leverage and highly concentrated market structure. And when that happens, it usually never ends well for the retail traders. That is just the way things have been all this time.
This article was written by Justin Low at investinglive.com.
