To The Moon

South Korea's stock market plunged again today, with the KOSPI index tumbling 12.06% after yesterday's 7.24% crash, marking the largest single-day decline in its history.

From the perspective of ETF performance, nearly all Korea-related products suffered significant declines. $iShares MSCI South Korea ETF(EWY)$ dropped 10.30% in a single day, while $Franklin FTSE South Korea ETF(FLKR)$ fell 10.25%, with both broad-based Korea ETFs posting similar losses. The leveraged product $Direxion Daily MSCI South Korea Bull 3x Shares(KORU)$ saw the most dramatic decline, plunging 31.10% in a single day, amplifying index volatility. The actively managed product $Matthews Korea Active ETF(MKOR)$ also fell 9.11%. The defense sector ETF $PLUS Korea Defense Industry Index ETF(KDEF)$ , which had gained 5% over two consecutive days, plunged 10.98% in overnight trading on Monday.

The core reason behind this sharp selloff remains the decline in technology stocks, particularly the concentrated drop in semiconductor heavyweights. Major index components such as Samsung Electronics, SK Hynix, and Hyundai Motor became the main drags on the market. Semiconductor leaders had previously driven the rally, but have now turned into the biggest source of downside pressure on the index.

Samsung Electronics and SK Hynix carry extremely heavy weightings in the KOSPI. Among tech heavyweights today, Samsung Electronics fell 7.10% while SK Hynix declined 4.91%. Together, the two companies account for nearly 40% of the index’s weighting. Both stocks have now dropped more than 20% over the past two sessions, directly dragging the broader market lower.

The biggest intraday declines today came from defense and industrial stocks, showing that panic selling has spread beyond technology. Hanwha Ocean plunged 17.09%, making it one of the largest decliners among major index constituents; Hanwha Aerospace fell 11.84%; HD Hyundai Heavy dropped 10.04%; and Doosan Enerbility slid 11.80%. All of these declines exceeded those of Samsung Electronics and SK Hynix.

Looking back at the rally that preceded this selloff, the Korean equity market over the past year was almost entirely driven by AI-related demand for memory chips. Surging global demand for AI servers pushed DRAM and HBM prices sharply higher, continuously lifting earnings expectations for Samsung Electronics and SK Hynix and driving their share prices up severalfold.

The immediate trigger for market panic came from escalating tensions in the Middle East. The conflict involving Iran pushed oil prices higher, with Brent crude briefly rising near $82 per barrel and WTI approaching $75. Investors worry that higher energy prices could reignite global inflation and force the Federal Reserve to delay rate cuts.

South Korea is the world’s eighth-largest consumer of crude oil and is highly sensitive to energy prices. When oil prices rise, corporate profit margins in Korea tend to face pressure, prompting investors to quickly reduce risk exposure. This makes the Korean equity market particularly volatile during periods of global geopolitical stress.