South Korea Market Selloff
South Korea’s equity market suffered one of its most turbulent sessions in years on Monday, CNBC reported, after overseas investors offloaded $13.2 billion in Korean stocks in a single week, sending Kospi volatility to near-record territory.
The Kospi benchmark dropped as much as 4% in early Asian trade. That extended a bruising 6% slide from Friday, which Goldman Sachs said wiped out the prior week’s gains.
Trading Curbs Triggered as Futures Crater
The violence in futures markets forced South Korea’s exchange to temporarily suspend some program trading. The so-called “sidecar” mechanism activated after Kospi 200 futures fell 5%, pausing automated order flow for five minutes to allow the market to stabilise.
The Kospi Volatility Index itself climbed more than 2.5% on Monday, approaching peaks last seen during market stress in early March.
South Korea accounted for the majority of a much wider regional exodus. Goldman Sachs data showed that foreign investors pulled roughly $17 billion from emerging Asian markets excluding China last week. That marked the second-largest weekly outflow on record for the region. Taiwan absorbed the next-largest hit at $2.5 billion.
A Record Rally Suddenly Reversed
The rout arrives with jarring speed. The Kospi had crossed the 8,000-point threshold for the first time ever just days earlier, propelled by enthusiasm for artificial intelligence-linked names, semiconductor companies, and heavy buying from domestic retail traders.
Goldman Sachs estimated that Korean retail investors alone purchased $14.1 billion in equities over the same week that foreigners were exiting. That cohort has become a defining force in the market this year, frequently using margin accounts and leveraged exchange-traded funds to amplify exposure.
Citi Trims Position, Flags Overheating Signs
Strategists at Citigroup warned the Korean market looks considerably more stretched than its US counterpart. The bank trimmed half of its bullish Korea trade, citing visible signs of retail “exuberance” rather than any conviction that the broader rally has ended.
Citi also flagged rising global bond yields as a structural headwind. Yields on Japanese government bonds and UK gilts both climbed sharply last week, driven by persistent inflation concerns and oil price pressure tied to tensions involving Iran.
Despite the caution, neither Citi nor Goldman abandoned their constructive longer-term view. Both banks noted that South Korea stands to benefit meaningfully from expected passive inflows tied to an upcoming MSCI index rebalance, a potential cushion against further foreign selling.
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