The rally in Korean stocks ran out of steam on just the second day. Will FOMO return?

Shares of South Korean companies surged sharply at the start of trading on July 22, but had lost nearly all of their gains by the close. The sell-off of leveraged positions—one of the main sources of pressure on the market—is nearing an end. However, retail investors have already shifted from FOMO—the fear of missing out—to JOMO—the relief of not having bought the stocks, according to the Maeil Business Newspaper.

At the start of trading in Seoul, the local Kospi stock index was up more than 6%. The previous day, the benchmark had risen 3.6%, and at its peak on July 22, the two-day gain nearly reached 10%, according to Bloomberg. The move was so sharp that the Korea Exchange briefly suspended algorithmic trading. However, by the close, the KOSPI had lost nearly all of its daily gains and ended the session up just 0.7%.

According to Yahoo Finance data, the intraday reversal was most pronounced in the shares of memory chip manufacturers—the largest companies in the index. SK Hynix, which had gained 9.3% during the day, closed down 0.3%. Samsung Electronics’ gains slowed from 6.6% to 0.6%.

Since its June high, the South Korean stock market has lost about $1.2 trillion in market capitalization, and the KOSPI has fallen by nearly 30%. At first, investors began to doubt that the boom in the memory chip market would last long. When prices started to fall, market participants began closing out positions in leveraged exchange-traded funds, which accelerated the sell-off, according to Bloomberg.

According to JPMorgan’s estimates, the process of reducing positions in leveraged funds is about three-quarters complete. As of July 16, the total volume of margin positions held by Korean investors had fallen to a quarterly low, the agency reports.

Just a month ago, the KOSPI had surpassed 9,000 points and was approaching 10,000, and investors were afraid of missing out on the gains from Samsung and SK Hynix. However, since then, the KOSPI has lost 25%— more than any of the world’s major indices. Samsung Electronics has fallen 31% from its peak, and SK Hynix has dropped 38%. The frenzy has given way to caution: trading volume has fallen by a third since the beginning of July, and online investment communities are saying, “Those who didn’t buy came out on top,” according to Maeil.

Investors believe the memory chip market boom has peaked, but Morgan Stanley remains optimistic, Maeil notes. According to analyst Joseph Moore, the risk of a worsening shortage of these chips in 2027–2028 is worrying the market more than ever. “The bet on memory manufacturers’ stocks has become too popular, and due to the unusual nature of the current cycle, a downturn is inevitable. But we view this weakness as a buying opportunity,” Moore said (as quoted by Maeil).

This article was AI-translated and verified by a human editor