KOSPI Market Volatility and Factors — 2026-07-29

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1. KOSPI Market Indicators and Flow Status

On July 28, 2026, the KOSPI plummeted 10.8%, falling near the 6,200 level. Over the past 25 trading days, the index has fallen 34%, recording its largest monthly drop in history for July.

Since hitting an intraday high of 9,385.59 on the 19th of last month, the KOSPI has been in a sharp downward spiral. The prevailing market consensus is that high volatility will persist for the time being.

As of July 27, the KOSPI closed at 6,755.75, having endured extreme volatility that triggered sidecar trading halts seven times this year.

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2. Key Factors Driving Today's Volatility

Doubts Over AI Data Center Investment Cycles Skepticism surrounding AI investment is sweeping the market. Concerns regarding the profitability of AI data center investments, coupled with risks associated with excessive leverage, have soured global investor sentiment, dealing a direct blow to South Korean semiconductor stocks.

Concerns Over China’s Accelerated Semiconductor Self-Reliance Following the explosive IPO of Changxin Memory, China’s success in independently developing lithography equipment has heightened fears regarding the competitiveness of South Korean chipmakers. SK Hynix ADR fell 9%, and Micron dropped 8.8%. While the Japanese market fell 4%, the KOSPI’s 10.8% plunge highlights how heavily the impact of China's semiconductor self-reliance is weighing on the South Korean market.

Currency Spike and Foreign Selling The continued strength of the dollar has pushed the KRW/USD exchange rate into the 1,460 range. A surplus of dollar supply and the U.S.'s high-interest-rate stance are driving the exchange rate higher, increasing concerns about further foreign sell-offs.

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3. Macro Factors and Economic Indicators

Deepening Upward Trend in Exchange Rates The KRW/USD exchange rate rose to 1,468.5 won, trading in the 1,450 range for the first time in 54 trading days (as of July 27). The rate continues to climb despite reports of ongoing negotiations following the pause in hostilities between the U.S. and Iran.

Entry into Semiconductor Earnings Season Domestic semiconductor companies, including Samsung Electronics and SK Hynix, are set to announce their earnings between July 27 and 31. While expectations can sometimes be priced in before the actual reports, there is concern that if results fall short, it could lead to further downward pressure.

Persistent Global Economic Uncertainty The extreme volatility of the South Korean market is drawing attention from global markets. Observations are being made that the KOSPI is trading like Bitcoin, and the possibility that the U.S. market could be exposed to similar volatility risks is being raised.

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4. Summary and Notes for Investors

Currently, the South Korean market is facing extreme volatility under the dual pressures of a reassessment of the AI investment cycle and the rise of China's semiconductor industry. With the KOSPI down 28.5% over the past month, the prevailing analysis is that a "V-shaped" recovery will be difficult, and the potential for a base interest rate hike by the Bank of Korea is acting as a further burden on the market.

Investors should closely monitor (1) the earnings results of semiconductor companies, (2) changes in exchange rate trends, and (3) the potential for a recovery in global AI investment sentiment. As high volatility in the spot market is expected to persist, a conservative approach focusing on using only available cash is recommended.