Wall Street Journal Warns Korean Stock Market Could End Like 'Squid Game'

The Wall Street Journal has issued a chilling warning regarding the South Korean stock market, suggesting it could end like the hit drama Squid Game.

The warning implies that after a spectacular rally, the majority of individual investors could be left to shoulder the losses.

According to the Wall Street Journal, the Korean stock market has posted a 165% gain over the past year, marking the highest return among major global economies.

Highlighting the extreme volatility seen in the KOSPI index during this period of gains, the outlet stated that the world's hottest market is at risk of becoming a Squid Game.

In the first half of this year, the volatility interruption mechanism was triggered 29,357 times in the KOSPI market, setting an all-time high for a half-year period.

The previous record was 24,401 times, set in the first half of 2020 when the stock market plummeted due to the COVID-19 pandemic.

The fluctuations of the KOSPI index itself were also at historic levels; the average intraday volatility of the KOSPI in the first half of this year was 3.30%, the second-highest on record following the 3.51% seen in the first half of 1998, immediately after the IMF crisis.

The Wall Street Journal analyzed that single-stock leverage products are amplifying these swings.

In fact, according to trading data by investor type from the Korea Exchange today (July 7), individual investors net purchased 1.6135 trillion won worth of 10 types of single-stock leveraged ETFs tracking Samsung Electronics and SK Hynix over the four trading days from July 1 to the market close on July 6.

Comparing this frenzy to a casino, the outlet warned that when the game ends, most of the losses could fall on domestic individual investors.

In the South Korean stock market, the scale of net foreign outflows in the first half of this year exceeded 100 billion dollars, or approximately 153 trillion won, with 30 billion dollars in outflows occurring in June alone.

While some view the explosive foreign selling as a temporary and mechanical adjustment following the market's rise, there are concerns that the selling trend is not abating and could intensify in the second half of the year.

Historically, the foreign ownership ratio in the KOSPI has ranged between 29% and 45%, excluding the 2009 Lehman Brothers crisis. Analysts suggest that if the current level of 39.5% were to drop to 35%, it could lead to approximately 260 trillion won in additional selling.

The outlook is that as the stock market rises, foreign demand for rebalancing will also increase, potentially sustaining the selling pressure.
※ Please note: This article was translated by AI and may contain errors.