KOSPI Plummets as AI Bubble Bursts Triggering Massive Margin Liquidations

Key Facts

In a move reflecting the risks of excessive leverage in the tech sector, South Korean markets experienced violent disruptions leading to billion-dollar liquidations. According to reports, the KOSPI index plummeted approximately 40% over a six-week period in June and July 2026 as the AI bubble that fueled previous gains burst. This sharp decline triggered widespread forced liquidations of margin-funded positions, accelerating selling pressure across the market.

The intense sell-off centered on the semiconductor sector, where Samsung Electronics and SK Hynix faced massive liquidations of margin positions and leveraged ETFs. According to analyst data, leveraged products tied to Samsung recorded outflows of $381 million in August, while withdrawals from positions tracking SK Hynix reached $601 million. Per market data, these movements reflect a radical shift in risk appetite among retail investors who were hit by record plunges in chip stocks.

Looking at current levels, pressure remains on the KOSPI after losing a significant portion of its market value during the summer, noting that authoritative price data is currently unavailable. Traders are watching for the FOMC minutes later today, August 26, 2026, for signals on global monetary policy that could impact emerging market capital flows, alongside tomorrow's Japanese Balance of Trade data to assess the health of the regional tech sector.