South Korea's 'Best Summer': 1.2 Million Liquidations, Trillions in Losses

The Allure and Collapse of a 'Golden Age'

South Korea's stock market, particularly its semiconductor sector, experienced a meteoric rise in early 2026, leading many to believe in a new 'golden age' of wealth creation. The success of companies like SK Hynix, which reportedly offered employees annual bonuses equivalent to millions of RMB, fueled a nationwide investment frenzy. Retail investors, including young people and even infants (via parental accounts), poured their savings and borrowed money into the market, often using high-leverage ETFs linked to blue-chip stocks like Samsung and SK Hynix. This speculative fervor led to a surge in luxury goods purchases and real estate prices, creating a widespread perception of easy wealth.

However, this 'best summer' quickly turned into a nightmare. Within less than a month, the KOSPI index plummeted by approximately a quarter from its peak. The combined market value of SK Hynix and Samsung alone shrank by an estimated 940 trillion Korean Won (approximately 4.3 trillion RMB). The use of two-times leverage ETFs meant that even a 'technical adjustment' rapidly escalated into a cascade of forced liquidations. Reuters reported that over 1.2 million retail investor accounts received margin calls, and 360,000 accounts were forcibly closed, with over 60% of those affected being under 30 years old. This sudden reversal left many bankrupt, some even resorting to extreme measures, highlighting the devastating social consequences of unchecked speculation.

Government's Role in Fueling the Fire

The article suggests that the intensity and speed of this market boom and bust were not merely accidental but were significantly influenced by government policies. Both the Yoon Suk-yeol and Lee Jae-myung administrations, despite their political differences, shared a common goal: to redirect Korean capital from savings, real estate, and foreign markets back into the domestic stock market. This was achieved through several measures, including delaying financial investment income tax, lowering securities transaction tax, and raising the threshold for capital gains tax on stocks, effectively making stock market profits largely tax-free for most retail investors. A temporary ban on short-selling further signaled government support for individual investors.

Crucially, the government actively endorsed the bull market through initiatives like the 'Corporate Value-Up Program,' encouraging companies to increase dividends and stock buybacks, and launching related ETFs for pension funds and retail investors. Lee Jae-myung even campaigned on a promise of a 5000-point KOSPI. The most impactful policy was the allowance of two-times leverage ETFs tied to single blue-chip stocks in early 2026, primarily targeting SK Hynix and Samsung. This made it incredibly easy for ordinary Koreans to amplify their gains, but also their losses. Only after the market's collapse did regulators intervene, raising the minimum margin requirement, a move seen as too little, too late, after the government had effectively acted as a 'major dealer' in this speculative game.

A Recurring Cycle of Speculation

The recent crash is not an isolated incident but rather the latest chapter in a recurring pattern of speculative bubbles in South Korea. The article draws parallels to the 1999 tech bubble, the 2020 'Donghak Ants' movement (where retail investors collectively bought blue-chip stocks during the pandemic), and the 2022 Luna coin collapse. In each instance, a 'get rich quick' mentality, fueled by the perception of limited traditional avenues for social mobility, led millions of Koreans to 'go all in' on speculative assets. The stories of overnight millionaires, though rare, consistently overshadow the widespread losses, perpetuating the cycle.

This phenomenon is rooted in a societal belief, as noted by Seoul National University Professor Choi Jae-won, that traditional paths to social mobility are increasingly closed, leaving speculative assets as the only perceived route to upward mobility. Despite repeated financial devastation, investors often learn not to avoid risk, but to try and enter earlier and exit faster in the next bubble. The article highlights the tragic consequences, including increased debt among young people and a rise in debt restructuring applications. The allure of rapid wealth accumulation, often amplified by government encouragement and easy access to leverage, continues to draw new 'ants' to the gambling table, ensuring that the cycle of boom and bust persists.