Korea's finance ministry puts the KOSPI down 28.9 percent in a month against 0.4 percent on Wall Street, and floats a 20 percent cap on leveraged holdings
Twenty eight point nine percent.
That is the KOSPI between the end of June and 28 July, in a footnote to the release the Ministry of Finance and Economy put out after an emergency meeting on Wednesday evening. The same footnote gives the United States at minus 0.4 percent over the identical window, Japan at minus 11.0, Taiwan at minus 9.8, China at minus 6.9, and the euro area up 0.5. Korea is the outlier by a factor of nearly three against the next worst.
Deputy Prime Minister Koo Yun-cheol convened the meeting at 7 p.m. at the Government Complex Seoul. Bank of Korea Governor Shin Hyun-song attended, with Financial Services Commission Chairman Lee Eog-weon, Financial Supervisory Service Governor Lee Chan-jin and the senior presidential secretary for economic growth, Ha Joon-kyung. It followed a second consecutive trading halt on the exchange, the first time that has happened.
What the participants concluded
The fall was led by semiconductors, the release says, as competition from Chinese memory makers intensified and worries spread about fundraising by large American technology firms. The participants judged that a correction after a steep run-up had been widened by weakened investor sentiment and by an imbalance between buyers and sellers.
They also said the fundamentals hold. Exports of semiconductors and other main products are still strong, the current account surplus is widening, and the forecast for operating profit at KOSPI-listed companies has been revised up. A second footnote quantifies that last point: KRW 301 trillion for 2025, against KRW 967 trillion forecast for 2026 as at 29 July. Excessive anxiety about the outlook, they agreed, is worth guarding against.
The vigilance language is unusually direct for a document of this kind. A 24-hour monitoring system will keep running, at what the release calls the highest level of alertness, for the time being.
Four measures, and one number that is an example
The already-announced package takes effect on 31 July, and the release confirms it. From Friday a buyer of a single-stock leveraged product needs KRW 30 million in cash, and that applies to further purchases by people who already hold one. In November the trading unit moves from one share to a provisional twenty.
On top of that, four things are to be pursued immediately:
- Total exposure management through per-investor limits. The example given in the document is a restriction to within 20 percent of total investment.
- A heavier cost on excessive trading behaviour, modelled on the excessive-quote charge already operating in the futures market.
- Simulated trading, added to the pre-trade education requirement that already exists.
- A legal basis for the authorities to take market stabilisation measures in an emergency, framed with reference to Hong Kong's flexible leverage ratios.
The parenthesis around the 20 percent matters. It opens with the Korean for "for example", and the release sets no threshold anywhere. Coverage that has the figure as decided is ahead of the document.
Beyond the leveraged products, the participants said they would accelerate what the release calls fundamental structural improvement of the capital market, naming corporate value and governance at listed companies and reform of the KOSDAQ market. No timetable is attached to either.
