Over the past few months, we have been closely following the chaos (rise and fall) in a once only marginally-monitored market on the other side of the world.
Namely, the AI/chip-driven KOSPI rally and subsequent sharp unwind concentrated in Samsung Electronics and SK Hynix...
And while the headlines (as the index was exploding higher day after day) have slowed, no lessor establishment entity than The Wall Street Journal has decided the numbers aren't enough - the notional trillions lost on the leverage-maxxing malarkey - we need a human story to bring it home as just how insane these manias can get (and oddly more frequently than you'd think, in South Korea).
They headline their story: "The World's Craziest Stock Market Has Turned Into a Fright Ride" to give you a sense of the fun ahead...
After tripling in the months prior, the Kospi plummeted around 40% over six weeks in June and July, burning hundreds of thousands of investors - a sober warning to those betting big on the AI industry. The roller-coaster ride has continued: The Kospi has since rebounded about 20% from its low.
Meet Yoon Jae-Yi, a 30-year-old English teacher, who lost $19,000, prompting her to cut her living expenses - fewer taxi rides, less travel.
Skipping meals, she tells herself, doubles as a diet.
Yoon Kyung-min, a 44-year-old sound engineer, said he still can’t believe the financial disaster of the past two months.
After quitting his job, he had invested half of his severance pay into semiconductor stocks and saw $7,200 evaporate in a week.
“If my wife finds out, I will be in serious trouble,” said Yoon, who says he confessed only to a bit of bad luck without giving details.
Yoon thought the market “would rise forever,” he said.
“The volatility is just too severe. This isn’t sound investing. It’s a gambling table, a casino,” said 68-year-old Jung Eui-jung, who heads the Korea Stockholders’ Alliance, a group representing the country’s roughly 14 million individual investors.
Many individual investors, like Jake Cheong, a 30-year-old accountant in Seoul, got hung out to dry.
He invested $29,000 or so into a leveraged ETF tracking the firm. The added leverage meant that if SK Hynix’s stock fell, Cheong’s losses would be compounded. Then came the crash.
As of Friday, his position has fallen 69% to roughly $9,000.
“My hard rule used to be that when too many people seem to be boasting about their stock gains, we’ve probably hit the peak,” Cheong said.
“But FOMO got the better of me.”
Lee Ka-young, a 25-year-old software developer, said she lost all the money she made when stocks soared this year.
“I got greedy,” Lee said. “I kept thinking, what if it climbed even higher after I cashed out?”
Her investments multiplied so fast—and vanished so quickly—it felt “like it was all a dream,” Lee said.
Investors (if that's what you would term them) now blame South Korean President Lee Jae Myung’s administration for loosening regulations to allow such potentially lucrative, high-risk funds.
His government has since put in place stricter rules around trading the ETFs with the aim of helping curb market volatility.
And that 'curbing' has led to South Korea’s leveraged ETFs tied to chipmakers seeing outflows near $1 billion this month as investor fervor over the AI trade cooled and regulators stepped up measures to curb demand.
Leveraged products tied to Samsung Electronics recorded outflows of $381 million so far in August, while withdrawal amounted to $601 million for those tracking SK Hynix, according to data compiled by Bloomberg Intelligence.
That would mark the first monthly outflow since their late-May launch.
And finally, if you were wondering, it's not over yet as every rebound in Samsung or SK Hynix is met with a wave of buying once again as 'chasers gonna chase'...
...although we'd note there has been considerably more two-way action.