Key facts
- South Korea's Kospi has fallen about 24% in the second half of 2026.
- The Kospi was the world's best-performing major stock benchmark in the first half of 2026.
- Samsung Electronics shares have fallen for two straight trading sessions despite forecasting a nearly ninefold increase in quarterly operating profit.
- Taiwan's Taiex has climbed about 7% in the second half of the year, with year-to-date gains of about 70%.
- Turnover on the Kospi has dropped 70% from its late-May peak.
South Korea's stock market, once the world's leading performer, has experienced a sharp reversal, losing momentum in the latter half of the year. The Kospi, which had surged in the first half of 2026, has since fallen approximately 24%, making it the worst-performing major market during this period, though it remains over 50% higher year-to-date.
Investors are increasingly shifting their focus away from South Korea's dominant memory-chip manufacturers, such as Samsung Electronics and SK Hynix, towards companies with broader exposure to the AI hardware supply chain. Analysts at GlobalData.TS Lombard highlighted that while Korean chipmakers' earnings growth was largely driven by rising memory-chip prices, Taiwanese and Japanese competitors like TSMC and Japanese chip-equipment makers are benefiting from more durable growth prospects rooted in advanced manufacturing and process expertise.
This shift has benefited Taiwan's Taiex, which has climbed about 7% in the second half of the year, contributing to a 70% year-to-date gain. The South Korean market's previous rally was heavily concentrated in Samsung Electronics and SK Hynix, which together constitute over half of the Kospi's weighting. This dependence on a single segment of the semiconductor industry has made the market vulnerable.
Even significant earnings beats, such as Samsung Electronics' forecast of a nearly ninefold increase in quarterly operating profit, have failed to excite investors, with its shares declining in the sessions following the announcement. The market has experienced extreme volatility, including a 22% plunge in July, its worst monthly performance since the 2008 financial crisis, followed by an 18% rebound on the final trading day of the month. This volatility triggered multiple circuit breakers, amplified by leveraged bets on chip stocks. Regulators have also tightened rules on leveraged single-stock exchange-traded funds amid concerns they fueled speculation.
Trading volumes have cooled significantly, with turnover dropping 70% from its late-May peak, and foreign investors have continued to withdraw capital from Korean equities. The trend reflects a broader debate among investors about whether the next phase of the AI boom will continue to favor memory-chip makers or expand across the entire semiconductor supply chain, a shift that appears to be benefiting Taiwan's more diversified AI infrastructure market.