John
Macro Commentary
Korea's KOSPI is dangerously concentrated, with Samsung and SK hynix making up 54% of the index, and a 90% rise in six months looks like euphoria and a top. Per @epictrades1, citing Korea's Financial Supervisory Service, over 1.2 million leveraged retail accounts faced margin calls by July 13, and roughly 320,000-360,000 were forcibly liquidated. Index dominance by so few stocks works until it doesn't, and latecomers become exit liquidity. x.com x.com x.com x.com
Retail leverage and AI concentration have fueled the Korean equities rout. The KOSPI fell more than 14% in a week, its worst weekly decline since 2008. Korean equities will fall further if the rout in SK hynix and Samsung continues, though some dip buyers may already be lining up. x.com x.com
South Korean equities look like a bubble about to burst because the KOSPI's 3.5x rise in 12 months, from 2,500 to above 8,500, rests on just two companies, Samsung and SK hynix. An index that concentrated is a trade, not a market, and parabolic trades like this break hard. x.com
Korean equities have a central role in the AI trade because Samsung and SK hynix supply most of the memory it needs. Despite the shakeout, the KOSPI leads the major markets shown at roughly +36% this year. The bullish lean faces a flow warning: Korean semiconductor ETF 20-day flows fell from nearly +$4B in June to about -$703M by October 18 as the index approaches rising support. x.com x.com x.com x.com x.com
The PCE release will knock the bottom out of the KOSPI. The index already looks about to erase yesterday's gains. x.com
Korean equities look like a leveraged mania in which money arrived faster than judgment, and borrowers may not survive the drawdown. Samsung and SK Hynix now make up over 54% of the KOSPI, up from 16% in 2016, and margin loans hit a record 36 trillion won, double a year ago, as Koreans surrendered insurance policies to buy stocks. On July 14 Samsung fell 10.70% and SK Hynix 15.37%, and the KOSPI sits near 6,750 from above 8,000. The businesses and the AI buildout remain real. x.com
Korean equities' July leverage-driven flush increasingly looks like exhaustion, not a failed AI thesis. The KOSPI rose 3.56% to 6,813, back in bull-market territory more than 20% above its July low, with Samsung up over 5% and SK hynix nearly 8% on reported sovereign-wealth interest and reaccelerating global AI capex. Korean semiconductor exports are running up 155% year over year in early August. x.com
Korean stocks face a leverage-driven crash, as more than $30 billion in daily-rebalancing leveraged products tied to Samsung and SK Hynix are forced to sell as prices fall. The two dominate the KOSPI, which has already fallen 25% in a month, and forced selling is feeding more forced selling. Korea has warned first before: its 1997 currency collapse, its chip stocks topping ahead of the 2000 Nasdaq crash and its 2008 breakdown before Lehman. x.com
Korean equities look more and more like a 2026 version of the 2018 XIV ETF collapse, propped up by leveraged flows. Per @infraa_, CSOP's 2x SK hynix ETF accounts for 60% of SK hynix's daily turnover, and SK hynix makes up 30% of the KOSPI. x.com
Korean equities look near a bottom as retail investors who levered long at the KOSPI top now short it at the lows. After new rules effective July 31 raised the minimum deposit for single-stock leveraged ETFs to ₩30M, retail net-sold over ₩1 trillion of single-stock leverage on day one, led by SK hynix and Samsung products, and bought about ₩500bn of index inverse ETFs instead, led by a 2x KOSPI inverse fund. x.com x.com
Korean equities are in trouble when accounts that never followed the KOSPI until a month or so ago start posting about it. x.com
