South Korea Market Rout Deepens After $13 Billion Foreign Selloff

CNBC reported Monday that South Korea’s stock market suffered a dramatic reversal after foreign investors offloaded $13.2 billion in Korean equities over a single week. The Kospi Volatility Index climbed toward peaks last seen in early March, while the benchmark index itself dropped as much as 4% in early Monday trade.

A Market Curb and a Sharp Reversal

The selloff was severe enough to trigger a so-called “sidecar” mechanism on the Korean exchange. Automated program trading was paused for five minutes after Kospi 200 futures fell 5%, a circuit-breaker designed to cool sudden volatility spikes. Monday’s drop extended Friday’s 6% tumble. Goldman Sachs described Friday’s decline as having wiped out weekly gains built around optimism from diplomatic signals and AI-driven momentum.

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How Korea Got Here: A Rally That Ran Too Hot

The broader context matters. The Kospi had only just crossed the 8,000-point threshold for the first time, powered by enthusiasm around chipmakers, artificial intelligence-linked stocks, and heavy retail participation. Domestic retail investors had bought roughly $14.1 billion worth of equities in the same week foreigners were selling, according to Goldman Sachs estimates. That group has been an outsized force in Korean markets this year, frequently using margin accounts and leveraged ETFs.

Strategists at Citigroup flagged the imbalance directly. The bank said Korea looked “much more overbought” than comparable US markets and trimmed half of its bullish Korea position as a precaution. Citi stopped short of abandoning the trade entirely, noting Korea stands to benefit from passive inflows tied to an upcoming MSCI index rebalance.

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Global Pressures Add to the Strain

The Korean selloff did not occur in isolation. Overseas investors pulled close to $17 billion from emerging Asian markets outside China last week. That figure represents the second-largest weekly outflow on record, per Goldman Sachs data. Taiwan absorbed $2.5 billion of those exits. Citi also pointed to a broader breakout in long-end bond yields globally, with Japanese government bonds and UK gilts both climbing on sticky inflation and elevated oil prices tied to tensions in the Middle East.

Despite the turbulence, both Goldman Sachs and Citigroup stopped short of calling an end to Korea’s bull run. The risk picture has shifted, but the structural case for the market remains intact for now.

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