15 Days After World Cup Exit, South Korea's National Stock Crashes

Original Author: Xiaobing

June 25th might be the day Koreans will remember most vividly from 2026.

That evening at the Monterrey Stadium, South Korea only needed a draw against South Africa to advance, but lost 0-1. Son Heung-min came off the bench, touching the ball 29 times throughout the match.

Three days later, the Democratic Republic of Congo came from behind to score three and overturn Uzbekistan. South Korea, having waited 71 agonizing hours, was squeezed out of the final 32, ending their 12th World Cup journey in a manner bordering on disgrace.

On that same day, June 25th, SK Hynix's stock price hit an all-time high. The national pride taken away by football was returned with interest by the memory chip giant. Little did anyone know, this day marked not only the end for Korean football but also the peak for SK Hynix's stock price.

Today, 18 trading days later, on July 13th at 9:35 AM, the Korea Exchange triggered its circuit breaker as the KOSPI's intraday decline widened to 6%. SK Hynix plunged as much as 12%, breaking below the 2 million won mark, hitting its lowest since June 11th, representing a 33% drop from its all-time high on June 25th.

The Hong Kong-listed 2x leveraged Hynix ETF fell over 22% in a single day.

Korea's true national team this summer collapsed faster than its football squad.

From Coronation to Collapse in Just Three Weeks

To understand the intensity of this decline, one must first grasp the frenzy of the preceding rally.

Over the past 12 months, SK Hynix's stock listed in Seoul rose approximately 850%, pushing its market cap past $1 trillion.

On June 22nd, it closed at a record high, its market cap briefly surpassing Samsung Electronics, ending the latter's decades-long reign as Korea's most valuable company. Holding over 56% of the global HBM market share and acting as the exclusive supplier for roughly 70% of Nvidia's next-generation AI server HBM orders, with long-term contracts extending to 2028, the company posted a first-quarter operating profit margin of 72%, even higher than Nvidia's.

Capital markets could find no purer AI memory play; Korea could find no prouder national champion.

A story circulated on Zhihu, purportedly from a young person in Seoul, goes something like this: It was the best summer of her adult life. She found a job that year, invested her entire salary into the stock market, and made five years' worth of pay, walking through the streets of Seoul with the illusion of being in a human golden age.

The golden age illusion lasted less than a month.

News broke in early July that Meta planned to sell AI computing power externally. The market's interpretation was brutal: a hyperscaler selling off "excess capacity" suggested oversupply. Morgan Stanley's chief US equity strategist subsequently recommended reducing semiconductor holdings, and the Philadelphia Semiconductor Index has fallen over 13% since July. On the first trading day this news reached Seoul, the KOSPI plunged nearly 8%, with SK Hynix dropping over 12% in a single day, erasing hundreds of billions of dollars in market value.

The market entered a state of chaos over the following two weeks:

July 3rd saw a sharp V-shaped recovery, with the KOSPI surging over 5%, triggering a circuit breaker that paused programmatic buying.

On July 7th and 8th, the market hit circuit breakers for two consecutive days. By the close on July 8th, it had retreated over 20% from its peak on June 19th, officially entering a technical bear market.

SK Hynix has seen over 50 trading days this year with single-day swings exceeding 5%. The total for all of last year was 37.

Circuit breakers on the way up and on the way down. The number of sidecar mechanisms and circuit breakers triggered in the Korean stock market in the first half of this year has already broken the historical record set during the 2008 financial crisis.

July 7th was perhaps the most telling day.

Samsung Electronics released its Q2 earnings guidance, projecting an operating profit of 89.4 trillion won, a staggering 1810% increase year-over-year, surpassing market estimates and even exceeding its total profit for the full year of 2025.

The strongest quarterly report in history was met with a plummeting stock price and a market-wide circuit breaker.

When a stock's price already factors in far more than its current earnings, even the most beautiful results are just answers to a past exam. The new paper the market holds asks different questions: Is the AI infrastructure buildout overheated? Will the massive capital expenditures of chipmakers ever be recouped?

Champagne in Nasdaq, the Bill in Seoul

In the same week the Seoul market entered a bear market, SK Hynix accomplished a monumental feat in capital markets history in New York.

On July 10th, SK Hynix's ADR debuted on the Nasdaq at an offering price of $149, raising $26.5 billion. This surpassed Alibaba's 2014 record, becoming the largest IPO by a foreign company in the US and the second-largest stock offering in US history, trailing only last month's SpaceX deal.

The offering was more than 7 times oversubscribed, with over 500 institutions participating. It opened at $170, hit an intraday high of $177, closed at $168.01, surging nearly 13% on its first day, achieving a market cap of approximately $1.22 trillion at the closing price. This vaulted it past Micron to claim the top spot in global memory chip market cap. At the bell-ringing ceremony, CEO Kwak Noh-jung stated the global memory industry was heading towards the most severe supply shortage ever in 2027; Chey Tae-won added that future demand would grow exponentially.

Pop champagne in New York, send the bill back to Seoul.

This victory had been bleeding the domestic market ever since preparations began. The initial pricing benchmark was set based on the June 23rd closing price of 2,555,000 won. As the stock price continued its decline, the benchmark had to be lowered to 2,425,000 won on July 3rd, shrinking the fundraising target by about $1 billion. Every bearish candle during the pricing window effectively discounted the Nasdaq offering price.

17.79 million new common shares represent real dilution. These new shares began trading in Seoul on July 29th.

According to Reuters, the company plans to convert and repatriate over twenty billion dollars of the proceeds back to Korea around mid-July. This massive currency conversion demand, amounting to hundreds of billions of dollars, is set to hit a foreign exchange market where the won has already weakened to 1,528 per dollar. Due to restrictions on converting Korean common shares into ADRs, the US-listed ADRs currently trade at roughly a 17% premium over shares in Seoul. This inverted price gap acts like a mirror, reflecting the vastly different treatment of the same asset in two markets: global funds are paying a premium for scarcity in New York, while holders in Seoul foot the bill for liquidity drainage and deleveraging.

The final match that sparked today's sell-off came from an earnings preview by domestic brokerage KIS.

The report estimated SK Hynix's Q2 operating profit at 60.4 trillion won, a staggering 556% increase year-over-year, yet roughly 8% below the market consensus of 65 trillion won. The reason lies in its pricing structure: HBM prices are locked in via long-term supply agreements, preventing short-term increases with market trends. When average spot prices for standard DRAM rose about 30% quarter-over-quarter and NAND by about 50% in Q2, Hynix, with its high HBM mix, benefited the least from this rally. Its greatest moat became a drag on average selling prices this quarter.

Up 556%, down 12%. At high stock price levels, "good enough" is more fatal than "bad." The market never wants just "better than expected"; it demands "better than imagined."

Ants, Leverage, and a Runaway Amplifier

Why did the same AI correction trigger a cascade of circuit breakers in Korea, and nowhere else? The answer lies in the market's structure.

The KOSPI has over 800 constituents, yet Samsung Electronics and SK Hynix account for over 43% of the index weight.

In May, Korea approved single-stock leveraged ETFs. Subsequently, these two stocks and their derivatives once accounted for 84% of all trading volume in the Korean stock market.

CSOP's 2x Long Hynix ETF saw its asset size briefly exceed $16 billion, with year-to-date gains topping 1000%, making it the world's largest product of its kind. Some institutions estimate that for every 1% market move, related Korean leveraged ETFs generate approximately $9 billion in mechanical rebalancing demand. These products rebalance daily, meaning they must sell more holdings when the market falls. The more it falls, the more they sell. Around early July, forced liquidations of Hynix-linked leveraged products accounted for a significant portion of that day's trading volume in the underlying stock.

Over the past month, more than 90% of investors in Hynix leveraged ETFs are sitting on losses.

The other side of the leverage coin is retail investors.

As of the end of May, Korea's credit financing balance hit a record high of over 38 trillion won. Year-to-date, foreign investors have net sold approximately $95 billion in Korean stocks, recording net selling for 13 consecutive trading days since the market peaked on June 19th, with a single-day record of 3.73 trillion won sold on July 7th. During this same period, self-proclaimed "ant" investors net purchased approximately $80 billion, absorbing nearly all of the foreign selling pressure on a near one-to-one basis.

Institutions retreat orderly from the top; retail investors, levered up, buy against the trend, betting on their national champion as an act of faith. When the market rises, national destiny and leverage reinforce each other. When it falls, they trample each other, with no buffer in between.

Yet, the bulls' cards are still on the table.

In that same report, KIS maintained its buy rating and a target price of 3.8 million won, arguing that as the industry shifts towards 3-to-5-year long-term contracts, the valuation anchor will move from quarterly price increases to the sustainability of high profitability. Kwak Noh-jung is betting the shortage will persist until after 2030.

The bears operate on a different logic: Samsung and SK Hynix's combined investment over the next decade could exceed 1,000 trillion won. The Korean government is building four more chip plants. Micron is also expanding capacity. The oligarchs are systematically dismantling the supply discipline that underpinned this cycle's windfall profits. Historically, the low P/E ratios of cyclical stocks appear most frequently at the peak of earnings.

The disagreement isn't about the company's survival, but its position in the cycle. Whether the KOSPI at 7200 points and a Hynix down by a third represent a deep breath within a super-cycle or a last look back from the edge of a cliff depends entirely on how much longer the AI capital expenditure engine can roar.

It took Koreans three days to accept the World Cup exit.

Their national champion stock hasn't given them that luxury. The day after tomorrow, over $20 billion begins to flow through the currency exchange markets. At the end of the month, 17.79 million new shares list in Seoul. Can the ants, who have already poured $80 billion into the market this year, catch the next falling knife?