South Korea’s Presidential Office Policy Office Director Kim Yong-beom announced on July 29 at a press conference in São Paulo, Brazil, that he has asked the Financial Services Commission and the Financial Supervisory Service to investigate structural factors behind the significantly higher volatility in South Korea’s stock market—such as the Korea Composite Stock Price Index (KOSPI)—than in other markets. The scope of the assessment will cover not only leveraged ETFs but also the entire market structure.
Investigation directive from Kim Yong-beom: Requesting checks for structural factors behind high stock-market volatility
Kim Yong-beom said South Korea’s stock market has its own structural problems: global market volatility of the same magnitude is often amplified in the South Korean market. He emphasized that leveraged ETFs may intensify market volatility, but they are not the only reason; factors such as the share of derivatives trading and the investor composition should be重点 examined. He said, “When market volatility reaches the highest level globally, investors become extremely concerned. The Financial Services Commission should review the structural factors that lead to such especially pronounced volatility—not only leveraged ETFs, but all markets.”
Regarding the specific mechanism of leveraged ETFs, he explained that leveraged ETFs adjust their weights near the close, which may temporarily affect the market, but sometimes volatility “appears even by early morning.” Judging by the time span, ETFs are not the only factor.
Analogy between CXMT’s listing and the impact of DeepSeek
Kim Yong-beom noted that two new factors have recently intensified the market pullback: Changxin Memory Technologies (CXMT) being listed in Shanghai and receiving strong market attention, and China state-owned enterprises advancing research and development of deep ultraviolet (DUV) lithography equipment. He said these factors may raise concerns in the market about the competitive strength of Samsung Electronics and SK hynix memory chips, and the situation is similar to the earlier “DeepSeek shock.” He said, “Two new factors have emerged: whether the competitive gap in memory chips for Korea can remain as solid as it is now.”
He added, “From China’s perspective, they will certainly try to develop their own industry,” and said that seeing this pullback made him feel more strongly that South Korea needs to build factories, invest in a timely manner, and be more cautious in R&D.
Structural factors in the stock market: Semiconductor and AI stocks account for 40-50%
Kim Yong-beom specifically pointed to multiple structural factors behind South Korea’s high stock-market volatility：
Market concentration：Semiconductor and AI-related stocks make up as much as 40%-50% of the market
Derivatives and ETF structure：The share of derivatives trading and the proportions of various ETFs are relatively high
U.S. stock-market spillover effect：Increased volatility in the U.S. stock market has a significant impact on South Korea’s market
AI investment uncertainty：There are still questions about whether large-scale investment patterns of major tech companies can remain sustainable
He also said at the same time that there is no doubt about the growth potential of the AI industry itself: “The application of artificial intelligence is not a flash in the pan.” He expects market demand to remain strong, but whether semiconductor supply can continue growing and whether future demand can be fully maintained remains undecided.
Frequently asked questions
What specific “structural factors” does South Korea’s Presidential Office ask to investigate for the high volatility in Korean stocks?
Based on Kim Yong-beom’s remarks at the São Paulo press conference, the scope of the investigation includes: the market concentration in which semiconductor and AI-related stocks account for as much as 40%-50%, the proportion of derivatives and ETFs, the spillover effect of volatility from the U.S. stock market, and the mechanism-driven impact of leveraged ETFs adjusting their weights near the close. The assessment is not limited to leveraged ETFs, but covers the structure of the entire capital market.
Why is CXMT’s listing compared to a “DeepSeek shock”?
Kim Yong-beom pointed out that China’s DRAM maker Changxin Memory Technologies (CXMT) is being listed in Shanghai and has attracted strong market attention. Combined with China state-owned enterprises pushing the R&D of DUV lithography equipment, the market has begun to question whether Samsung Electronics and SK hynix in South Korea can maintain their competitiveness in memory chips. This shift in market sentiment is similar to the doubts about AI chip demand raised earlier by DeepSeek.
What is Kim Yong-beom’s overall judgment on the outlook for AI investment?
Kim Yong-beom said there are questions about whether large-scale AI investment patterns by major technology companies can remain sustainable; semiconductor supply may continue to grow, but it remains undecided whether future demand can be fully maintained. At the same time, however, he stressed that there is no doubt about the AI industry’s own growth potential: “The application of artificial intelligence is not a flash in the pan.” He expects market demand to remain strong.
