Bloomberg: The biggest crisis for South Korean stocks is not a sharp drop, but the loss of market trust On August 4th, Bloomberg columnist Shuli Ren stated that the core issue facing the South Korean stock market is not the deterioration of corporate fundamentals, but rather the impact on market structure, regulatory policies, and investor trust. According to reports, the South Korean stock market once became one of the hottest performing but most volatile markets in the world this year, with KOSPI plummeting nearly 40% in just 27 trading days. Although Samsung Electronics and SK Hynix still benefit from the demand for AI chips, and the expected P/E ratio of the South Korean stock market drops to about 5.5 times in the next 12 months, investors may still choose to avoid the South Korean market. Ren pointed out that one of the important reasons for the abnormal volatility of the South Korean stock market is the previous approval of single stock leveraged ETF products by regulatory authorities. Due to the need for leveraged ETFs to mechanically adjust positions based on market trends, buying when they rise and selling when they fall, further amplifying market volatility. Goldman Sachs data shows that during KOSPI's peak in June this year, if SK Hynix's stock price fluctuates by 5%, leveraged ETF rebalancing fund flows may account for 40% of the daily trading volume of the stock. In addition, the sharp decline has also dealt a heavy blow to Korean retail investors. Data shows that the most popular SK Hynix leveraged ETF fell 84% from its June high, with approximately 360000 accounts experiencing forced liquidation, of which 62% were held by holders under the age of 35. Ren believes that the South Korean government has previously promoted capital market reforms and attracted retail investors, but failed to fully control leverage risks during the AI trading boom, which is weakening young investors' confidence in the local market. She stated that the current problem with the South Korean stock market is not the lack of AI growth opportunities, but rather the questioning of market rules, regulatory credibility, and trading stability. If high volatility persists, even if the AI industry continues to thrive, global funds may choose to bypass the South Korean stock market. [Original link]