Korean Stock Market Crash — From the Hottest in the World to the Worst in History

Korean investors have experienced a week that will go down in history.

On March 3rd, the KOSPI index in Korea resumed trading after the holiday and immediately faced heavy selling, closing down 7.24%, the largest single-day decline since August 2024, triggering a circuit breaker during the session. The next day, even more severe declines followed: the KOSPI opened lower and continued to fall, with a maximum drop of over 12%, closing down 12.06% — surpassing the 12.02% decline on the day after 9/11 in 2001, setting a new record for the largest single-day drop in the index’s history. The KOSDAQ index for startups plunged 14%, also hitting a record low.

What happened?

Just a week before the crash, the Korean stock market was the brightest star in the global capital markets. As of February 27th, the KOSPI had gained over 48% year-to-date, and from its April 2025 low, it had surged over 125%. The epic bull market was driven by a clear force — the “super cycle of storage chips” fueled by the global AI wave. Samsung Electronics and SK Hynix, the two giants, together accounted for about 40% of the KOSPI’s weight, with their stock prices soaring over 80% and 60% respectively this year.

However, the geopolitical storm in the Middle East shattered this AI-driven rally. News of Iran blocking the Strait of Hormuz caused international oil prices to surge continuously, and fears of inflation and a slowdown in global economic growth quickly spread among investors.

The decisive withdrawal of foreign capital became the final straw that broke the market.

Data shows that on March 3rd, foreign investors sold over 5 trillion won net in the Korea Composite Index market, with Samsung Electronics and SK Hynix alone experiencing net sales of over 3 trillion won and over 1 trillion won respectively. The concentrated sell-off by foreign investors, combined with algorithmic trading stop-loss orders, created a “downward—selling—further down” stampede cycle.

Kim Dojoon, CEO of Seoul Zian Asset Management, warned: “Many buy orders in the market rely on financing, with investors only putting in 30%-40% margin. Now, these positions are facing forced liquidation. If the market continues to fall, no one will be eager to catch the ‘falling knife’.”

In response to the crash, the Korean government acted urgently. The Bank of Korea and the Ministry of Finance held an emergency meeting, and the Financial Committee announced plans to actively deploy 100 trillion won in market stabilization measures to address “excessive volatility.” But restoring market confidence is far from something that can be achieved with a mere statement.

From the hottest in the world to the worst in history, the Korean stock market took only one week. Behind this is a market highly dependent on semiconductors, foreign capital, and leverage — fragile and powerless in the face of geopolitical shocks.