South Korean Stocks Plunge 18.8% in Q3, Becoming the Worst-Performing Major Index Globally
nashnova research
Korea's Kospi slumped 18.8% in Q3 after a violent unwind of AI memory trades made it the world's worst-performing major benchmark — yet the index is still up 60% year-to-date, leaving investors split on whether cheaper valuations are opportunity or trap.
How did Korea end up the global laggard?
Kospi fell 18.8% in Q3; China's CSI 300 dropped 12.5% for second-worst; the S&P 500 rose 2.3%.
The trigger was a concentrated unwind of AI memory-stock positions in July — the sectors that had rallied hardest got hit hardest.
This means → Korea's market has become a proxy bet on AI infrastructure spending: it leads on the way up and takes the first blow when positions reverse.
What actually happened in the July sell-off?
Leopold Aschenbrenner's hedge fund Situational Awareness held oversized leveraged positions in Korean memory stocks; the fund blew up in July.
Korean retail investors had piled into single-stock leveraged ETFs, amplifying the unwind into a stampede.
In plain terms = institutional leverage blew up on one side, retail leverage collapsed on the other, and the two forces hitting the market at once produced the worst quarterly loss globally.
After the sell-off, is Korea cheap?
Samsung Electronics and SK Hynix now trade at forward P/E ratios of 4–5×; together they account for roughly half of Korea's total market capitalisation.
Prashant Bhayani, Asia CIO at BNP Paribas Wealth Management, says valuations are more attractive but tempers expectations: "Could you get reasonable returns? Yes. Could you see a 70% rally again? Absolutely not."
Joshua Crabb, head of Asia-Pacific equities at Robeco, agrees that chip stocks "are already trading on low single-digit P/Es, so the direct valuation hit should be limited."
What headwinds remain?
Rate hikes: the Bank of Korea is raising rates to curb inflation; the economy shows overheating signs, with property prices and equities having rallied in tandem.
Higher bond yields: Crabb flags elevated yields as a "headwind" for Korean equities.
Oversupply risk: an August report from S&P Global Market Intelligence warns of "cyclical oversupply risk" that could pressure future earnings.
What cards do the bulls still hold?
High-bandwidth memory — HBM, the critical component in Nvidia's AI accelerators — is dominated by Samsung and SK Hynix; conventional DRAM and NAND prices have also surged.
Jongmin Shim, head of Korea research at CLSA, is upbeat on Korean chipmakers: "AI companies have no choice but to keep spending — it's an existential decision."
This means → the bull case rests on one core bet: US hyperscaler AI spending will not stop even as financing costs rise.
But a 60% year-to-date gain signals that much of the good news is already priced in; further upside requires AI capex to beat expectations and memory supply-demand to tighten again.
市场有风险，内容仅供研究参考，不构成投资建议。