South Korea’s Main Index plunges 12%, Posts Worst Drop Ever
According to Bank of America, the selloff was driven by the unwinding of highly leveraged positions and heavy foreign outflows.
Quick overview
- South Korea's KOSPI index dropped 12%, its largest daily decline since 2008, amid heavy foreign outflows and unwinding of leveraged positions.
- The selloff has resulted in a 15% decline since the onset of the Middle East conflict, with foreign investors increasingly selling off margin positions.
- The Korean won has weakened significantly, surpassing the 1,500 level against the dollar, as geopolitical tensions continue to impact market stability.
- Analysts warn that rising oil prices due to the conflict could further jeopardize South Korea's trade position and economic outlook.
South Korea’s benchmark KOSPI plunged 12%, marking its steepest daily drop since the global financial crisis and the worst one-day decline since 2008.
According to Bank of America, the selloff was driven by the unwinding of highly leveraged positions and heavy foreign outflows from Korean equities. The index has now fallen roughly 15% since the outbreak of the Middle East conflict.
“The sharp decline reflects excessive leverage in long positions prior to February 28, 2026, when market sentiment was extremely bullish on Korean technology stocks due to the aggressive shortage of memory chips used in AI server production,” said BofA strategist Chun Him Cheung.
He added that the rapid liquidation of long positions wiped out crowded trades, triggering a broader deleveraging across the Korean equity market. Since February 28, foreign investors have been net sellers in margin positions tied to the KOSPI, accelerating the market’s downturn.
Won weakens amid market turmoil
The selloff has also hit the Korean currency. The won weakened sharply, with the dollar climbing above the 1,500 level. Cheung warned that foreign-exchange volatility could persist as long as geopolitical tensions remain unresolved.
He also noted that the Middle East conflict could begin to erode South Korea’s trade position through higher oil prices, adding another layer of risk to the country’s economic outlook.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
- Read our latest reviews on: Avatrade, Exness, HFM and XM
