KOSPI's collapse wipes out South Korea's annual GDP

Trading on South Korea's stock exchange was suspended for 20 minutes yesterday after the KOSPI index dropped over 8%. From its June peak, the index has now fallen more than 40%, erasing over $2 trillion in market capitalization.

The KOSPI is as closely watched in South Korea as the S&P 500 is in the US. The sell-off has dropped the country's AI-heavy stock market from sixth to tenth place globally.

To put it in perspective, the loss is larger than South Korea's total annual economic output, which was about $1.9 trillion in 2025. It also surpasses the total value of all bitcoin in circulation, roughly $1.6 trillion.

Worryingly, the KOSPI's decline surpasses the assets of South Korea's National Pension Service, the third-largest retirement fund globally, which holds about $1.3 trillion in savings. Those savings have contracted along with the market.

The KOSPI finished yesterday at 5,554, a 7.6% drop, marking its seventh straight daily decline. During the session, it fell up to 9.3%, triggering its 10th circuit breaker this year.

Yesterday was labeled 'Black Thursday' by South Korean media.

With a drawdown of over 40%, the current crisis is nearing the median decline of 43.7% seen in previous South Korean market crises, such as Black Monday in 1987, the Asian financial crisis of 1997, the dot-com bust of 2000, and the 2008 global financial crisis.

Reviewing KOSPI's Black Thursday

Remarkably, Samsung Electronics and SK Hynix, both AI chipmakers, account for about half of the KOSPI index's market capitalization.

Because of their outsized underperformance in recent months, these two companies have been responsible for 70% of the KOSPI's decline since its June high.

July marked the KOSPI's worst month since the 2008 crisis, but October has already approached July's total loss and may be headed for an even steeper decline.

Officially, South Korea's stock market is more volatile than BTC

Retail investors have intensified the volatility through leveraged single-stock ETFs. The finance minister has apologized for introducing such products.

Goldman Sachs has likened this month's sell-off to March 2020 and August 2011, the only two instances in the past two decades of KOSPI trading that saw such severe selling without a rebound day.

In January, South Korea's stock market broke into the global top 10 by surpassing Germany, with a market cap of $3.25 trillion. By June, it had risen above $5 trillion to reach sixth place. It currently stands in 10th.

On Thursday, the chairman of South Korea's Financial Services Commission convened an emergency meeting. He directed financial firms to "maintain vigilance" and "actively respond to ensure financial market stability and investor protection."