BT Explainer | What led to South Korea stock market crash after record rally in Kospi index

Kospi crash: The benchmark Kospi index suffered a massive selloff on Friday, May 15, erasing gains made earlier in the session. After breaching the historic 8,000 mark for the first time to hit an all-time intraday high of 8,046.78, a wave of selling washed over the market. The index ultimately closed at 7,493.18, plunging 488.23 points or a 6.12% drop.

Friday's closing figure marks a 6.9% plunge from the peak of the trading session. According to South Korea’s stock exchange data, this 6.12% crash represents the largest single-day percentage decline for the Kospi since March 23, 2026, when the index ended 6.49% lower.

Kospi rally

The reversal cut short a stellar bull run that had seen the Kospi rise over 185% in just one year, positioning South Korea as one of the world’s top-performing major equity markets. However, the very engine driving this historic rally also triggered its downfall: an extreme market concentration in artificial intelligence (AI)-linked chipmaker stocks. Meanwhile, the Kospi index had closed higher in 23 of the last 31 trading sessions since the start of April.

Why the market crash?

South Korea’s equity market had become reliant on two semiconductor giants—Samsung Electronics Co Ltd and SK Hynix Inc. Investors heavily piled into Korean chip stocks. Stock exchange data revealed just how massive this concentration had become: Samsung and SK Hynix together command over 40% of the entire Kospi index weight.

The peak, the plunge

Over the one year period, Samsung shares rocketed over 375%, while SK Hynix witnessed an astronomical surge of about 790%. Stock exchange data shows, Samsung and SK Hynix hitting breathtaking highs of 299,500 KRW and 1,995,000 KRW, respectively, during the past two sessions.

But the continuous optimism faded on Friday. The rally abruptly reversed as institutional and individual investors hit the sell button to lock in profits. Because so much of the Kospi’s momentum depended entirely on these two counters, the profit-taking quickly snowballed into a broader market rout. By the closing bell, Samsung Electronics had crashed 8.61%, while SK Hynix plunged 7.66%, dragging the rest of the index into the deep red.

Beyond pure valuation fatigue, other specific triggers accelerated the sell-off. On the home front, sentiment around Samsung was dented by an ongoing labor dispute. The unresolved labour issue served as one of the additional triggers to slash exposure to the rallied stock. 

Broader risk appetite across Asian markets was already brittle due to rising crude oil prices and escalating geopolitical uncertainty in West Asia. Compounding the tech sector's global selloff, climbing global bond yields also put pressure on high-flying technology shares.