The South Korean stock market's wild swings have had a devastating impact on investors, with one individual losing a staggering $14,000 in a single month. This extreme volatility, particularly in the tech-heavy Kospi index, has been driven by the global frenzy around artificial intelligence and the subsequent wild swings in the value of the country's biggest chipmakers. The Kospi's sharp correction between June and August, comparable to the drops during the Covid-19 pandemic and the 1997 Asian financial crisis, has left many investors in a desperate situation, with some even taking out loans to invest.
The impact of this market volatility is deeply personal, as evidenced by the stories of Woongsa Kim, Chanyong Park, and Youngji Park. Kim, who invested half of a work bonus in tech giant SK Hynix, saw his shares quadruple in value before most of those gains were wiped out, leaving his investment worth only half of its peak. Park, who put profits from soaring Nvidia shares into SK Hynix, now faces a loss of around $10,000. Youngji Park, who invested the majority of his available cash into Samsung shares, has also suffered a "gut-wrenching" slump.
The use of leverage, a growing trend among personal investors, has exacerbated the situation. By the end of July, an estimated 1.2 million South Korean personal investor accounts had faced margin calls, equivalent to about one in every 30 working-age adults in the country. This trend has also picked up in markets like Taiwan and the US, raising the risks around AI-related stocks.
The impact of the Korean stock market's volatility extends beyond its borders. Tech-heavy indexes like Japan's Nikkei 225 seem to be moving in tandem with the Kospi's wild swings, but the majority of the world's stock markets are unlikely to see the same level of violent moves due to their diversification. However, the Korean market's volatility serves as a warning to investors, especially young investors, not to put all their eggs in one basket and to adopt a more cautious approach.
The constant need to monitor investments has taken a toll on individuals like Yongjoon Kim and his fiancée, Gaeon Lee. Lee worries about Kim's mental health, as the market's volatility has affected their savings set aside for a new home. This personal impact highlights the human cost of market volatility and the importance of responsible investing.
