Korea's National Fortune Stocks Collapse on Day 15 After World Cup Exit

Author: Xiao Bing

June 25 may be the most memorable day for Koreans in 2026.

That night, at the Estadio BBVA, the Korean team only needed to draw against South Africa to advance, but they lost 0-1. Son Heung-min came on as a substitute and touched the ball 29 times throughout the match.

Three days later, the Democratic Republic of the Congo scored three goals to overturn Uzbekistan, pushing the Korean team out of the top 32 after a wait of 71 hours. This marked the end of Korea's 12th World Cup journey in an almost humiliating manner.

On the same day, June 25, SK Hynix's stock price surged to an all-time high. The national pride taken away by football was returned double-fold by the storage sector. No one expected that this day would mark both the end of Korean football and the peak of SK's stock price.

Today, 18 trading days later, on July 13 at 9:35 AM, the Korea Exchange triggered a circuit breaker, with the KOSPI index dropping by as much as 6% during the session. SK Hynix's stock plummeted by 12%, falling below 2 million won, hitting a new low since June 11, and retreating 33% from its historical high on June 25.

The Hong Kong stock market's double-leveraged ETF for Hynix dropped over 22% in a single day.

This summer, the real national team of Korea has collapsed even faster than the football team.

From Crowned to Lost in Just Three Weeks

To understand the intensity of this decline, one must first grasp the madness of the previous rise.

In the past 12 months, SK Hynix's stock listed in Seoul surged by about 850%, with a market capitalization exceeding 1 trillion USD.

On June 22, it set a record for the highest closing price, briefly surpassing Samsung Electronics in market value, ending the latter's decades-long reign as Korea's market cap king. Holding over 56% of the global HBM market share, it exclusively supplies about 70% of HBM orders for Nvidia's next-generation AI servers, with contracts extending to 2028 and a first-quarter operating profit margin of 72%, even higher than Nvidia.

The capital market could not find a purer AI storage target than it, and Korea could not find a prouder national emblem.

A story circulated on Zhihu about a young person in Seoul, stating that this was the best summer since coming of age. They found a job, invested all their salary in the stock market, made five years' worth of salary, and felt a sense of human golden age while walking the streets of Seoul.

The illusion of a golden age lasted less than a month.

In early July, news broke that Meta planned to sell AI computing power, leading buyers to interpret it simply: a super-large manufacturer starting to sell "excess capacity" indicated that the market might be oversaturated. Morgan Stanley's chief U.S. equity strategist immediately suggested reducing semiconductor holdings, and the Philadelphia Semiconductor Index has since dropped over 13% in July. On the first trading day after the news reached Seoul, the KOSPI plummeted nearly 8%, and SK Hynix fell over 12% in a single day, with its market value evaporating by over 100 billion USD.

In the following two weeks, the market entered a state of frenzy:

On July 3, a deep V rebound occurred, with the KOSPI rising over 5%, triggering a circuit breaker and halting programmatic buying;

On July 7 and 8, it hit the circuit breaker for two consecutive days, with the closing price on July 8 retreating over 20% from the June 19 high, officially entering a technical bear market.

SK Hynix has had over 50 trading days this year where the daily price fluctuation exceeded 5%; last year, this number was 37.

Both rises and falls triggered circuit breakers, and the number of times the sidecar mechanism and circuit breaker were activated in the Korean stock market in the first half of this year has both broken historical records set during the 2008 financial crisis.

The most telling day was July 7.

Samsung Electronics released its second-quarter earnings forecast that day, reporting an operating profit of 89.4 trillion won, a staggering year-on-year increase of 1810%, exceeding market expectations and even surpassing its full-year profit forecast for 2025.

The strongest quarterly performance in history resulted in a sharp drop in stock price and a market-wide circuit breaker.

When a stock's price reflects profits that have long surpassed the current profit statement, no matter how beautiful the earnings report, it is answering a previous exam. The new exam in the market is asking different questions: Is AI infrastructure overheating? Can the massive capital expenditures of chip manufacturers be recouped?

Champagne in Nasdaq, Bills in Seoul

In the same week that the Seoul market fell into a bear market, SK Hynix accomplished a significant feat in New York that would be recorded in the annals of capital markets.

On July 10, SK Hynix's ADR landed on Nasdaq, with an issue price of 149 USD, raising 26.5 billion USD, surpassing Alibaba's record from 2014, becoming the largest IPO by a foreign company in the U.S., second only to SpaceX's stock issuance last month in U.S. history.

The subscription was over 7 times, with more than 500 institutions participating. On the first day of trading, it opened at 170 USD, peaked at 177 USD, and closed at 168.01 USD, soaring nearly 13% on the first day, with a market value of approximately 1.22 trillion USD at the closing price, surpassing Micron and taking the top spot in global storage chip market capitalization. During the bell-ringing ceremony, CEO Kwon Oh-hyun proclaimed that the global memory industry is heading toward the most severe supply shortage in history by 2027; Choi Tae-won stated that future demand will grow exponentially.

Celebrating with champagne in New York, while sending the bill back to Seoul.

This victory has been draining the local market since the day it was prepared. The initial benchmark price was set at the closing price of 2.555 million won on June 23, but the stock price continued to decline, forcing the benchmark to be adjusted down to 2.425 million won on July 3, reducing the fundraising scale by about 1 billion USD. Each bearish candle during the pricing window was discounting the Nasdaq pricing.

The 17.79 million newly issued common shares are a tangible dilution, with the new shares set to be listed and traded in Seoul on July 29.

According to Reuters, the company plans to gradually convert the more than 20 billion USD raised back to Korea around July 15, with hundreds of billions of dollars in foreign exchange demand hitting the foreign exchange market, which has already fallen to 1,528 won per 1 USD. Due to restrictions on converting Korean common stocks to ADRs, the U.S. ADR is currently trading at a premium of about 17% over the Seoul stock price. This inverted price difference acts like a mirror, reflecting the starkly different treatment of the same asset in two markets: global funds in New York are rushing to pay a premium for scarcity, while holders in Seoul are paying the price for liquidity withdrawal and leverage clearance.

This morning, the final match that ignited the sell-off came from a performance forecast by the local Korean brokerage KIS.

The report predicted SK Hynix's second-quarter operating profit to be 60.4 trillion won, a year-on-year increase of 556%, but about 8% lower than the market consensus of 65 trillion won. The reason lies in the pricing structure: HBM prices are locked in by long-term supply agreements, and contract prices do not adjust with market conditions in the short term. While the average spot price of ordinary DRAM rose about 30% and NAND about 50% in the second quarter, Hynix, with the highest proportion of HBM, actually benefited the least from this round of price increases. Its biggest moat became a drag on average prices this quarter.

Growth of 556%, drop of 12%. At high stock prices, not being good enough is more fatal than being bad; the market has always demanded better than expected.

Ants, Leverage, and an Out-of-Control Amplifier

Why did the same AI pullback lead to a series of circuit breakers in Korea? To answer this question, one must look at the skeleton of this market.

The KOSPI index has over 800 constituent stocks, with Samsung Electronics and SK Hynix accounting for over 43% of the index weight.

In May this year, Korea allowed single-stock leveraged ETFs, and since then, these two stocks and their derivatives have accounted for 84% of the trading volume in the Korean stock market.

The double-leveraged ETF for Hynix from Southern Asset Management once exceeded 16 billion USD in assets, with an annual increase of over 1000%, making it the largest product of its kind globally. Some institutions estimate that for every 1% fluctuation in the market, related leveraged ETFs in Korea generate about 9 billion USD in mechanical rebalancing demand. These products rebalance daily, and during declines, they must sell more holdings; the more they drop, the more aggressively they sell. Around July 2, leveraged products linked to Hynix accounted for a significant portion of the trading volume of the underlying stock.

In the past month, over 90% of Hynix leveraged ETF investors have been in a losing position.

On the other end of leverage are retail investors.

As of the end of May, the balance of credit financing in Korea exceeded 38 trillion won, setting a new historical high. Since the beginning of this year, foreign capital has net sold about 95 billion USD from Korean stocks, continuously net selling for 13 trading days since the peak on June 19, with a single-day net sell of 37.3 trillion won on July 7; during the same period, retail investors, self-identified as "ants," net bought about 80 billion USD, almost taking on all the sell-offs one-to-one.

Institutions orderly retreated at the top, while retail investors leveraged up to build positions against the trend, betting on the national industry as a belief. When prices rise, national fortune and leverage mutually enhance each other; when they fall, both trample on each other, with no buffer in between.

However, the bulls still have cards on the table.

In the same report, KIS maintained a buy rating with a target price of 3.8 million won, reasoning that as the industry shifts to a 3 to 5-year long-term contract structure, the valuation anchor will shift from quarterly average price increases to how long high profitability can be sustained; Kwon Oh-hyun is betting that the shortage will continue until after 2030.

Bears see a different logic: Samsung and SK Hynix's total investment over the next decade is expected to exceed 1,000 trillion won, the Korean government is building four more chip factories, and Micron is expanding production simultaneously. The oligopolists are dismantling the supply discipline that supported this round of excess profits, while the low P/E ratios of cyclical stocks have historically appeared at the peaks of profitability.

The divergence is not about the survival of the company, but about the cyclical coordinates. The KOSPI at 7,200 points and Hynix, which has dropped by a third, is either a deep breath in a super cycle or the last look back at the edge of the rooftop, depending on how long the AI capital expenditure engine can roar.

After the World Cup exit, Koreans accepted it in three days.

The national fortune stocks did not give them that opportunity; the day after tomorrow, over 20 billion USD will start to be exchanged; by the end of the month, 17.79 million new shares will be listed in Seoul. After already pouring 80 billion USD this year, can the "ants" catch the next baton?