Bloomberg reported that individual investors fed up with the extreme volatility in the domestic stock market in July are leaving the KOSPI market.
On Aug. 2, Bloomberg, in an article titled "Small investors shattered by KOSPI plunge blame LEE (President Lee Jae-myung) and vow never to buy again," said individual investors who suffered heavy losses from unprecedented volatility are criticizing that "the Korean stock market is closer to a casino than a stock market" and are exiting the Korean market.
In July, the KOSPI plunged 22% over the month, marking the biggest monthly drop since the global financial crisis. On July 31, it rebounded with an 18% surge in a single day, but individual investors instead left the market, posting the largest-ever net selling.
Kim Han-kyung, in the late 30s and living in Seoul, said in an interview with Bloomberg, "I invested in Korean stocks for the first time in early May, and now I am really scared," adding, "I carved two rules in my mind. First, do not invest in the Korean stock market; second, follow the first rule."
Bloomberg pointed out that the single-stock leveraged exchange-traded funds (ETFs) introduced in May to prevent capital outflows to overseas markets and expand investment opportunities are instead being criticized for exacerbating market volatility. High-multiple leveraged products, it said, played a role in fueling the market crash.
Lee Jeong-min, in the 40s, who said a 50 million won loan was taken out using an apartment as collateral for stock investing, said in an interview with Bloomberg, "The government poured fuel on the fire with leveraged ETFs," adding, "I think turning the stock market into a casino floor is wrong."
Bloomberg said volatility was further amplified by the concentration in which Samsung Electronics and SK hynix, the two semiconductor leaders, account for more than 50% of the KOSPI's market capitalization. Samsung Electronics fell 21% in July, and SK hynix plunged 35%. Still, both stocks remain several times higher than in early 2025, buoyed by the benefits from artificial intelligence (AI) chips.
The government's belated response also came under fire. Financial authorities only in mid-July temporarily halted new listings of single-stock leveraged ETFs and rolled out measures to strengthen risk management, but among individual investors who had already suffered massive losses, criticism is mounting that it is "locking the barn after losing the cow."
The KOSPI's extreme volatility in July is also weighing on the Lee Jae-myung administration. Francis Tan, Asia chief strategist at Indosuez Wealth in Singapore, said, "The current situation is presenting considerable difficulties for the government."
Bloomberg said, "The AI craze that had driven gains in the Korean stock market is likely to remain intact going forward," but added, "It may take longer to restore investors' trust than for the market to recoup its losses."