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South Korean stocks lost momentum after a powerful AI-linked rally as foreign and retail investors pulled back, trading activity fell, and investors questioned how long memory-chip profits could keep growing. A Bloomberg report published by The Business Times on October 11, 2026, described a sharp second-half reversal; its figures are period-specific, not live market data.
What changed after South Korea’s AI rally?
The October 11, 2026 report said turnover in South Korean shares was 70% below its late-May peak. The KOSPI, which it described as the best-performing major equity benchmark in the first half of 2026, had fallen 22% in the second half through the report’s publication and was then the worst-performing major benchmark over that period. AI-heavy markets in Taiwan and the United States, by contrast, had reached new highs. These are the report’s dated comparisons, not current quotes.
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The shift was visible in investor participation as well as index performance. Bloomberg-compiled exchange data cited in the report showed foreign funds had withdrawn US$131 billion from South Korean stocks during 2026, the largest outflow among major Asian markets. Richard Tang, head of research Hong Kong at Julius Baer, said: “We have seen capital increasingly gravitate back toward US equities, contributing to ongoing foreign outflows from the Korean market,”
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Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minuteRetail participation also appeared to cool. The report put margin loans at around 33 trillion won over the previous month, down from a June peak of 38.6 trillion won, citing the Korea Financial Investment Association. Brokerage account balances were around 100 trillion won, compared with a record near 140 trillion won, according to the report. The figures describe different measures of investor activity and should not be treated as interchangeable.
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Why did the AI trade become harder to sustain?
The index depended heavily on two memory-chip makers
Samsung Electronics and SK Hynix, both central suppliers of memory chips used in AI infrastructure, together represented more than half of the KOSPI’s weighting, according to the report. That concentration made the market especially sensitive to doubts about whether the memory-chip boom and associated earnings growth could last. A strong AI theme can lift an index quickly, but a narrow group of dominant companies can also magnify a change in expectations.
Some investors still see the companies as inexpensive relative to current earnings. Jon Withaar, a portfolio manager at Pictet Asset Management in Singapore, said: “The memory names in particular have become value names, cheap at current earnings,” and added, “But retail and fast money hedge funds do not chase value or the concept ‘cheap’. They chase growth.” The distinction helps explain why a stock can look inexpensive on current results yet attract less momentum-driven buying if investors are unsure those results will keep expanding.
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The easy gains may already have been made
Phillip Wool, head of portfolio management at Rayliant Global Advisors, said: “The biggest challenge I see for most investors – especially those who only recently got into Korea for the memory chip trade – is that the easy money in that theme has been made,” His comment reflects one market participant’s view, not a forecast or consensus.
Leverage amplified volatility
A July 17, 2026 Reuters analysis put the October reversal in a broader context of volatility and leveraged trading. Reuters reported that more than half of South Korea’s circuit breakers in market history had occurred in the preceding six months, and that retail margin loans stood at 34.37 trillion won in the week of its report after reaching a June record of 38.6 trillion won. These are historical snapshots, not current balances. Reuters also reported that regulators were seeking to block new launches of single-stock leveraged funds and that a higher minimum cash balance for trading single-stock leveraged ETFs was due to take effect August 5. That July account does not establish the rules in force today.
Reuters quoted Alexander Redman, chief equity strategist at CLSA, saying: “The index has decoupled from all of Korea’s historical drivers,” The remark speaks to the market’s unusual volatility at the time, rather than proving a single cause of the later pullback.
Buybacks were a source of demand that could fade
The October report said Samsung and SK Hynix were nearing completion of combined share buybacks worth 55 trillion won (US$41 billion). According to JPMorgan Chase, the two companies’ repurchases accounted for most of the US$23 billion in market buy orders in September. As those programmes neared completion, one source of buying demand might diminish. The report did not establish that buybacks caused the market’s decline.
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Why has Taiwan attracted more AI investors?
The report presented Taiwan as a competing destination for investors seeking AI exposure. Its account cited a wider and deeper technology-hardware supply chain and a more upbeat earnings outlook than South Korea’s. Wu Chun-Lai, head of Asia asset allocation at UBS Global Wealth Management Chief Investment Office, said: “At this point in time, we prefer to express our tactical AI exposure through Taiwan equities, which offer a more complete technology hardware ecosystem and are supported by robust spending plans from major technology companies,” This is an attributed investment view, not a recommendation for readers.
Do these 3 things before closing this tab:
1Clear out junk files and repair common Windows errors2Fix the driver behind crashes, sound loss and screen glitches3Repair Windows errors before they cause bigger problemsThe report’s performance comparisons cover different stated windows, so they should not be conflated:
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| Measure reported on October 11, 2026 | South Korea | Taiwan |
|---|---|---|
| Index performance | KOSPI fell 22% in the second half of 2026 through the report’s publication. | Taiex was up 70% in 2026 through the report’s publication. |
| Quarterly relative performance | KOSPI trailed the Taiex by about 23 percentage points in the previous quarter. | Taiex’s lead over the KOSPI was the widest since the turn of the century, according to the report. |
| Share of index constituents that doubled in value during 2026 | 4.7% of KOSPI members. | About 10% of Taiex members. |
| AI-related market exposure described in the report | Highly concentrated: Samsung Electronics and SK Hynix together made up more than half of KOSPI weighting. | Broader and deeper technology-hardware supply-chain links; the report did not give a comparable concentration percentage. |
| Earnings outlook described in the report | Less upbeat than Taiwan’s, in the report’s account. | More upbeat than South Korea’s, in the report’s account. |
The gap describes relative market performance over the periods specified by the report. It does not by itself establish which market will perform better next.
What could support South Korean shares from here?
The report also outlined a counterargument: if AI spending remains strong and memory-chip profitability holds up, the share-price decline could present a buying opportunity. South Korea’s government corporate-value initiative was another potential source of support. These are possible supports, not evidence that the market has already turned or that the outlook will prove correct.
The competing interpretations are therefore about durability and breadth: whether memory-chip earnings can continue to justify the market’s earlier optimism, and whether investors will return to a market whose AI exposure the report described as concentrated. The available figures establish a dated pullback and investor retreat; they do not settle those forward-looking questions.
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