Francis Hunt
Trading Education, Hunt Volatility Funnel & Capital Preservation
Korean equities are vulnerable as leveraged domestic retail buyers, who replaced massive foreign withdrawals as the source of SK Hynix and Samsung demand, are being forced out. Per @SamanthaLaDuc, Korea's Financial Supervisory Service reported 1.2 million leveraged retail accounts hit margin calls on July 13, and 320K-360K were fully liquidated. x.com
Korean equities and the won face damage from proposed taxes on unrealized gains. Per Kalshi, Korean lawmakers are reportedly discussing taxing unrealized gains, and National Assembly forum proposals to tax unrealized gains on stocks and real estate as income already contributed to a market selloff. That kind of tax-scavenging would force citizens to sell assets to pay tax on paper gains, hurting the KOSPI and the won. 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
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 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
South Korean stocks are losing market confidence as foreign investors keep selling. The KOSPI fell as much as 5% in a day, triggering a 5-minute halt on program selling, with SK hynix down more than 8% and Samsung nearly 6%. Foreigners have sold since July 28 while retail investors bought every dip. The pause can slow the selling but can't restore confidence. 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' 2026 crashes were forced-liquidation flushes, not a broken thesis, and memory earnings and exports will carry KOSPI back up. All four circuit-breaker days came from external or technical shocks, a war-driven oil spike, a crowded AI unwind and foreign outflows, amplified by record retail margin debt above 38tn won; none came from Korean earnings breaking. SK Hynix just posted record revenue at a 72% operating margin. The real risk is the memory cycle itself rolling over. x.com
Korean equities' forced deleveraging is not over, with the first stage of margin calls now under way. Brokers auto-liquidated 360,000 accounts, 62% of them held by under-35s who used margin and 2x leveraged ETFs, per @Normal_2610. KOSPI margin loans hit a record KRW 38.63tn in late June, retail losses from borrowed money reached KRW 2.15tn in a month, and the government opened a debt counseling hotline. The liquidation phase is still continuing. x.com x.com x.com
Korean equities are set up for more damage because retail investors hold the most leveraged position in market history at the highest valuation, after the smart money left. The KOSPI tripled in a year on AI chips, with Samsung and SK hynix about half the index, then fell 9.99% on June 23 as foreigners and institutions sold about $8.5 billion. Retail bought a record $7.16 billion, funded by record margin debt of 38.48 trillion won and new 2x single-stock ETFs, and kept buying the bounce. x.com
Korean equities look past the earnings selloff because fundamentals never changed and sentiment is catching up. The KOSPI turned green with foreign investors net buyers two days straight and institutions buying hard, while Samsung is stabilizing after its post-earnings-beat volatility. It is not all clear, but an end to earnings selling is usually a good sign, as Sandisk and AMD showed with turbulence into an aggressive rally. x.com
Korean equities face a leveraged-retail liquidation that is getting out of control. Per @fintergirl, young Koreans priced out of Seoul apartments are buying the KOSPI with 5x portfolio margin and 2x single-stock ETFs; 360,000 accounts have been liquidated, 62% of them held by under-35s, and KOSPI margin loans hit a record 38.63 trillion won at end-June. Retail losses on borrowed money reached 2.15 trillion won in a month, with more liquidation likely. SK hynix is already back to April levels. … Show more
