World Cup Elimination Day 15: South Korea's National Stock Crashes

Original author: Xiao Bing

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

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

Three days later, the Democratic Republic of Congo staged a comeback, scoring three consecutive goals to overturn Uzbekistan. After 71 agonizing hours, South Korea was squeezed out of the top 32, ending their 12th World Cup campaign in a manner bordering on disgrace.

On that same June 25, SK Hynix's stock price hit an all-time high. The national pride taken away by football was doubly returned by the memory chip giant. No one realized that this day marked both the end of Korean football's journey and the peak of SK Hynix's stock curve.

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

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

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

From Coronation to Collapse: Only Three Weeks

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

Over the past 12 months, SK Hynix's shares listed in Seoul surged approximately 850%, pushing its market capitalization past $1 trillion.

On June 22, it set a historic closing record, 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, it is the exclusive supplier for about 70% of NVIDIA's next-generation AI server HBM orders, with long-term contracts extending to 2028. Its Q1 operating profit margin hit 72%, even higher than NVIDIA's.

Capital markets couldn't find a purer AI memory play, and Korea couldn't find a prouder national champion.

A tale circulated on Zhihu, a self-narrative from a young Seoulite (likely an anecdote): It was the best summer since she came of age. She found a job that year, poured all her salary into the stock market, and earned five years' worth of pay. Walking the streets of Seoul, she felt an illusion of a golden age for humanity.

The illusion of a golden age lasted less than a month.

News broke in early July that Meta plans to sell its AI computing power externally. The market's interpretation was brutally simple: a hyperscaler starting to sell "excess capacity" suggests the market might have overbuilt. Morgan Stanley's chief US equity strategist quickly recommended reducing semiconductor exposure. 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 falling over 12% in a single day, erasing hundreds of billions in market cap.

Over the next two weeks, the market entered a state of mania:

On July 3, a deep V-shaped rebound saw the KOSPI soar over 5%, triggering a circuit breaker that halted programmatic buying;

On July 7 and 8, the market hit circuit breakers two days in a row. By the close on July 8, it had retreated over 20% from the June 19 high, formally entering a technical bear market.

SK Hynix has experienced over 50 trading days this year with single-day swings exceeding 5%, compared to 37 for all of last year.

Surge triggers a halt, crash triggers a halt. The number of sidecar mechanisms and circuit breakers triggered in the Korean stock market in the first half of this year has already shattered the historical record set during the 2008 financial crisis.

The most telling day was July 7.

That day, Samsung Electronics released its Q2 earnings guidance: operating profit of 89.4 trillion won, a staggering 1810% year-over-year increase, surpassing market estimates and even exceeding its entire 2025 annual profit.

Its strongest quarterly report card ever was met with a sharp stock price decline and a market-wide circuit breaker.

When a stock's price has already priced in far more than its current income statement, no matter how stellar the earnings report, it's answering the previous exam paper. The new exam paper in the market's hands asks different questions: Is AI infrastructure overbuilt? Can the massive capital expenditures for chip fabs be recouped?

Champagne in Nasdaq, the Bill Sent to Seoul

In the same week the Seoul market tumbled into a bear market, SK Hynix achieved a milestone in capital market history in New York.

On July 10, SK Hynix's ADR debuted on Nasdaq. With an issue price of $149, it raised $26.5 billion, surpassing Alibaba's 2014 record to become the largest IPO by a foreign company in the US, and the second-largest stock offering in US history after SpaceX last month.

The offering was oversubscribed over 7 times, with more than 500 institutional investors participating. It opened at $170 on its first day, hit an intraday high of $177, and closed at $168.01, surging nearly 13% on debut. At the closing price, its market cap was approximately $1.22 trillion, surpassing Micron to claim the top spot in global memory chip market value. At the bell-ringing ceremony, CEO Kwak Noh-Jung declared the global memory industry was heading towards the most severe supply shortage in history by 2027. Chairman Chey Tae-won said future demand would grow exponentially.

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

This victory had been bleeding the domestic market since its preparation began. The base issue price was initially set based on the closing price of June 23 (2.555 million won), but as the stock kept falling, the base was forced down to 2.425 million won on July 3, reducing the fundraising scale by about $1 billion. Every bearish candle during the pricing window was a discount applied to the Nasdaq offering price.

The 17.79 million new common shares represent real dilution, and these new shares will begin trading in Seoul on July 29.

According to Reuters, the company plans to repatriate over $20 billion in proceeds back to Korea around mid-July through foreign exchange conversions. This massive currency exchange demand, worth hundreds of billions of dollars, will hit a forex market where the won has already weakened to 1,528 won per dollar. Due to restrictions on the conversion of Korean common shares to ADRs, the US ADR currently trades at about a 17% premium over the Seoul stock price. This inverted price disparity acts like a mirror, reflecting the vastly different treatment of the same asset in two markets: global funds compete for the premium of scarcity in New York, while holders in Seoul pay for liquidity drainage and deleveraging.

The final spark triggering today's morning 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 556% year-over-year surge, but roughly 8% below the market consensus of 65 trillion won. The reason lies in the pricing structure: HBM prices are locked in via long-term supply agreements and don't adjust upward with short-term market fluctuations. While average spot prices for standard DRAM rose about 30% quarter-over-quarter in Q2, and NAND rose about 50%, Hynix, with the highest HBM proportion, actually benefited the least from this price rally. Its greatest moat became a drag on average prices this quarter.

A 556% growth resulted in a 12% stock decline. At peak prices, "good, but not good enough" is more deadly than "bad." The market always demands better than imagined.

Ants, Leverage, and an Out-of-Control Amplifier

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

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

In May this year, Korea allowed single-stock leveraged ETFs. Subsequently, these two stocks and their derivatives accounted for up to 84% of trading volume on the Korean stock market.

The 2x leveraged Hynix ETF from CSOP, once exceeding $16 billion in assets and up over 1000% year-to-date, is the world's largest product of its kind. Some institutions estimate that for every 1% market fluctuation, Korea's related leveraged ETFs generate about $9 billion in mechanical rebalancing needs. These products rebalance daily; when the market falls, they must sell more positions – the more it falls, the more they sell. Around July 2, forced liquidations of Hynix-linked leveraged products once accounted for the majority of the underlying stock's daily volume.

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

The other side of the leverage coin is retail investors.

By the end of May, Korea's credit financing balance hit a record high, exceeding 38 trillion won. This year, foreign investors have net sold approximately $95 billion from Korean stocks. Since the peak on June 19, they have been net sellers for 13 consecutive trading days, selling 3.73 trillion won on July 7 alone. During the same period, Korean retail investors, known as "ants," net bought roughly $80 billion, absorbing nearly every won of the selling pressure one-to-one.

Institutions retreat orderly from the top, while retail investors, armed with leverage, build against the trend, betting on their national industry as a faith. When the market rises, national destiny and leverage reinforce each other; when it falls, they trample on one another without any buffer in between.

Yet, the cards for the bulls might still be on the table.

In the same report, KIS maintained an overweight rating and a target price of 3.8 million won, arguing that as the industry shifts to 3-to-5-year long-term contract structures, the valuation anchor will shift from average quarterly price increases to how long high profitability can last. CEO Kwak is betting the shortage will extend beyond 2030.

Bears see a different logic: Samsung and SK Hynix's total investment over the next decade could surpass 1,000 trillion won. The Korean government is building four more chip fabs, and Micron is simultaneously expanding production. The oligarchs are systematically dismantling the supply discipline that underpinned this cycle's windfall profits. And cyclical stocks' low P/E ratios have historically appeared most often at profit peaks.

The divergence isn't about whether the companies survive, but about where they are on the cycle coordinates. Whether the KOSPI at 7,200 points and Hynix down by a third represent a deep breath within a super-cycle, or the last look back from the edge of the rooftop, depends entirely on how long the engine of AI capital expenditure can keep roaring.

Koreans accepted the World Cup elimination in three days.

Their national champion stock didn't give them that chance. The day after tomorrow, over $20 billion begins its currency conversion journey. By the end of the month, 17.79 million new shares will list in Seoul. Can the ants, who have already poured in $80 billion this year, still catch the next baton?