Key Takeaways
- • The Kospi, the world's best-performing major benchmark in the first half of 2026, has fallen about 24% since, making it the worst-performing major market in the second half, though it remains more than 50% higher year to date (Business Insider).
- • Samsung Electronics and SK Hynix account for more than half of the Kospi, leaving the index unusually dependent on memory-chip profits.
- • The Kospi plunged 22% in July, its worst month since the 2008 financial crisis, then rebounded 18% on the final trading day for its biggest one-day gain on record, with multiple market-wide circuit breakers triggered.
- • Taiwan's Taiex outperformed the Kospi by more than 23 percentage points in the third quarter, gaining nearly 4% while South Korea's fell more than 19%; the Taiex is up about 70% year to date.
- • Turnover on Korean markets has dropped 70% from its late-May peak as foreign investors continue to withdraw from Korean equities, and regulators have tightened rules on leveraged single-stock ETFs.
Summary
South Korea's equity market has moved from the strongest performer among major global benchmarks in the first half of 2026 to one of the weakest. According to Business Insider, the Kospi has fallen about 24% since, making it the worst-performing major market in the second half, although it remains more than 50% higher for the year. Investors have not abandoned the AI trade, but are increasingly seeking exposure beyond South Korea's memory-chip producers toward companies with broader participation in the AI hardware cycle.
The Kospi's rally was driven largely by Samsung Electronics and SK Hynix, whose memory-chip profits surged during the AI boom. Together the two companies represent more than half of the index. Analysts at GlobalData.TS Lombard noted in July that much of the earnings growth at Korean memory makers reflected higher memory prices, whereas TSMC and Japanese chip-equipment makers rely more on advanced manufacturing and process expertise, which they argue supports more durable growth. Even strong results have failed to lift sentiment: Samsung forecast a nearly ninefold increase in quarterly operating profit last Thursday, yet its shares fell for two consecutive sessions.
Volatility has been extreme. The Kospi dropped 22% in July, its worst month since 2008, before rebounding 18% on the final trading day of the month, its largest single-day gain on record. Leveraged positions on chip stocks amplified the swings and triggered multiple market-wide circuit breakers. Regulators responded by tightening rules on leveraged single-stock ETFs over concerns they had fueled speculation. Turnover has fallen 70% from its late-May peak, and foreign investors have continued to sell Korean equities.
Taiwan has been the principal beneficiary of the rotation. The Taiex gained about 7% in the second half and is up roughly 70% year to date, as its market offers exposure across advanced chip manufacturing, packaging, servers and networking equipment, including TSMC. In the third quarter the Taiex outperformed the Kospi by more than 23 percentage points, rising nearly 4% while South Korea's index fell more than 19%.
The Kospi's rally was driven largely by Samsung Electronics and SK Hynix, whose memory-chip profits surged during the AI boom. Together the two companies represent more than half of the index. Analysts at GlobalData.TS Lombard noted in July that much of the earnings growth at Korean memory makers reflected higher memory prices, whereas TSMC and Japanese chip-equipment makers rely more on advanced manufacturing and process expertise, which they argue supports more durable growth. Even strong results have failed to lift sentiment: Samsung forecast a nearly ninefold increase in quarterly operating profit last Thursday, yet its shares fell for two consecutive sessions.
Volatility has been extreme. The Kospi dropped 22% in July, its worst month since 2008, before rebounding 18% on the final trading day of the month, its largest single-day gain on record. Leveraged positions on chip stocks amplified the swings and triggered multiple market-wide circuit breakers. Regulators responded by tightening rules on leveraged single-stock ETFs over concerns they had fueled speculation. Turnover has fallen 70% from its late-May peak, and foreign investors have continued to sell Korean equities.
Taiwan has been the principal beneficiary of the rotation. The Taiex gained about 7% in the second half and is up roughly 70% year to date, as its market offers exposure across advanced chip manufacturing, packaging, servers and networking equipment, including TSMC. In the third quarter the Taiex outperformed the Kospi by more than 23 percentage points, rising nearly 4% while South Korea's index fell more than 19%.
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