South Korea’s stock market volatility

South Korea’s stock market has swung wildly in recent days, underscoring how the world’s best-performing equities market last year is turning into its most volatile one.

The benchmark Kospi index plunged as much as 12% on Wednesday, marking its largest single-day drop on record, before staging a powerful rebound in the next session, up nearly 10%, marking its best day since 2008. It was trading over 1% lower on Friday.

The whipsaw comes as investors reassess risks from the escalating war in the Middle East, which has sent oil prices surging and rattled markets globally, and the market’s concentration in a few stocks.

While the global risk-off mood has played a major role, experts said Korean market’s concentration in two memory giants and its sensitivity to energy shocks has made it particularly vulnerable to sharp swings.

“Korea is a bit of an outlier, if you look at the other stock markets’ reaction,” said Jason Hsu, chief executive officer at Rayliant Global Advisors. He added that the Kospi’s heavy concentration in a handful of technology stocks, meant that market moves tend to be magnified relative to more diversified indices.

“It is natural its volatility is enormous,” he told CNBC.

SK Hynix, is up nearly 45% this year, having skyrocketed 274% last year. Similarly, Samsung Electronics, which is up about 60% since the start of the year, surged 125% in 2025.

Both make up about one-third of Kospi’s total market capitalization as of early November, according to a report from the Korea Capital Market Institute.

That concentration tends to amplify volatility: when the memory chip cycle is strong the index can rally rapidly, but when investors take profits or sentiment turns risk-off, declines in those few heavyweight stocks can drag the entire market lower, said analysts.

The Kospi Volatility Index surged 27% to hit a record high on Wednesday at the height of the sell-off. It has since dipped to around 8% on Thursday, but remains at record high levels. 

Retail leverage amplifies swings

Another factor amplifying the market’s moves is South Korea’s large base of retail investors and its active derivatives market, according to market veterans. 

“This is just too much of the leverage trading that’s affecting the market,” said Daniel Yoo, global strategist at Yuanta Securities.

“We had a huge amount of margin calls for retail investors. So they just dumped it… And then [on Thursday] it went back up again. It has nothing to do with…