As the artificial intelligence investment boom cools, South Korea's stock market is facing the dual pressures of large-scale foreign investor withdrawals and a sharp decline in market trading activity.

Exchange data shows that since the start of the year, foreign investors have withdrawn a cumulative US$131 billion from the South Korean stock market, the largest outflow among major Asian markets.

The total market capitalization of South Korea's stock market is about US$4.3 trillion, market turnover has shrunk 70% from its late-May peak, and the benchmark KOSPI index has fallen 22% since the second half of 2026.

Previously, driven by demand for AI memory chips, the KOSPI had been the world's best-performing major stock index in the first half of the year.

AI Chip Rally Reverses, Samsung and SK Hynix Become Main Sources of Market Pressure

The strong gains in South Korea's stock market in the first half of the year were largely driven by growth in memory chip demand fueled by artificial intelligence infrastructure construction.

Samsung Electronics and SK Hynix, as major global memory chip manufacturers, directly benefited from the expansion of investment in AI servers and high-performance computing.

Together, the two companies account for more than 50% of the KOSPI index weight, and their share price performance has a major impact on South Korea's overall market.

However, as investors began to question whether the semiconductor industry's growth cycle can be sustained, the market's previously highly AI memory chip-dependent upward structure gradually became a source of risk.

Samsung Electronics reported on Thursday that quarterly operating profit rose nearly ninefold year on year, but the company's share price still fell, reflecting that strong current earnings data failed to dispel investors' concerns about future chip demand.

As Samsung and SK Hynix share prices came under pressure, South Korea's stock market also shifted from a global leader in the first half to one of the major markets with larger declines in the second half.

Foreign Capital Withdraws US$131 Billion During the Year, Support from Share Buybacks Weakens

Continued divestment by foreign investors has further intensified downward pressure on South Korea's stock market.

According to Korea Exchange data, since the start of the year, foreign investors have net sold about US$131 billion of South Korean stocks, the largest capital outflow among major Asian stock markets.

At the same time, market support from listed companies' share buybacks is also weakening.

Samsung Electronics and SK Hynix previously implemented share buyback plans totaling 55 trillion won, about US$41 billion, and both companies are now close to completing those plans.

As large-scale buybacks gradually end, the market may lose part of an important source of stock purchase demand.

With foreign capital continuing to flow out, weakening buyback support further increases the difficulty for South Korea's stock market to attract new funds.

Retail Trading Activity Declines, Margin Balances and Brokerage Deposits Both Shrink

In addition to foreign investors, the participation of South Korea's domestic retail investors is also declining.

Since the stock market sell-off in July, both the scale of margin trading and the balances of brokerage client funds in the South Korean market have decreased significantly.

Specifically: margin financing and securities lending loan balances fell from a June peak of 38.6 trillion won to about 33 trillion won, a decline of about 14.5%.

Brokerage client margin and deposit balances fell from nearly 140 trillion won to about 100 trillion won, a decline of about 28.6%.

Market turnover shrank 70% from its late-May peak, indicating a sharp drop in stock trading activity.

The decline in margin balances reflects a reduction in the scale of investors using leverage to participate in stock trading, while the shrinkage in brokerage client fund balances indicates that funds available for stock trading have decreased.

Under the combined effect of foreign capital withdrawal, corporate buybacks nearing their end, and declining retail trading willingness, the problem of insufficient buying demand in South Korea's stock market has become more evident.

First-Half Gains Still Provide Support, Full-Year Return Performance Remains Relatively Good

Although South Korea's stock market suffered a sharp correction in the second half, thanks to strong gains in the first half, the KOSPI remains one of the relatively better-performing major markets so far in 2026.

At the same time, large global technology companies are still advancing artificial intelligence infrastructure investment, and related demand continues to provide some long-term growth support for the semiconductor industry.

However, short-term trends in the South Korean market have already shown that investors' expectations for different parts of the AI supply chain are diverging.

Confidence in sustained growth in memory chip demand has weakened somewhat, while interest in Taiwanese technology stocks with broader supply chain coverage has risen.

The core problem for South Korea's stock market at present is that Samsung Electronics and SK Hynix together account for more than half of the KOSPI weight, making the index highly sensitive to the memory chip prosperity cycle.

Against the backdrop of large-scale foreign capital withdrawal, cooling retail trading, and the gradual end of corporate buybacks, whether AI memory chip demand and related corporate earnings growth can continue in the future will become an important factor in whether South Korea's stock market can resume its rise.