Korean Stocks Rebound as Samsung Beats, State Curbs Leveraged ETFs
South Korean equities rallied from a historic two-day crash as blockbuster Samsung earnings validated the artificial intelligence trade and regulators moved to dismantle the leveraged ETF structures that amplified the sell-off.
The benchmark Kospi Index climbed 4.5% on Thursday, snapping a brutal two-session rout that had erased 16% of its value and triggered consecutive market-wide circuit breakers. The recovery was driven by a dual catalyst: robust corporate earnings and an aggressive regulatory clampdown.
Samsung Electronics provided the fundamental anchor, with its shares surging 7%. The company’s semiconductor division reported a June-quarter operating income of 89.2 trillion won, crushing the average analyst estimate of 79.3 trillion won. Chip unit net income jumped more than 250-fold, while group-wide net income reached 71.3 trillion won. Rival SK Hynix advanced 2.4% after shedding nearly a quarter of its value over the prior two days.
Those results directly countered the narrative that had fueled the panic: doubts over the sustainability of AI-related investments. However, it was the government's emergency intervention late Wednesday that forced the immediate unwinding of bearish momentum.
Top officials from the finance ministry, the Bank of Korea and financial regulators pledged to stabilize the market by targeting the retail leverage that supercharged the decline. New rules will cap retail exposure to leveraged exchange-traded funds at a set percentage of total portfolios and increase trading costs.
The regulatory shift fundamentally alters the plumbing of the Korean market. “The measures were very strong,” said Huh Jae-Hwan, an analyst at Eugene Investment & Securities. “They are determined to stabilize the market and to put it negatively, it means they will kill the ETFs. To put it positively, they are trying to change the noises coming from the ETFs so they are very strong measures.”
Despite the sharp bounce, the Kospi remains roughly 35% below its June peak, leaving investors to navigate a vastly different trading environment. “Volatility like this is now the price of entry, not proof that the AI story is over,” said Josh Gilbert, Asia Pacific and Middle East lead analyst at Etoro Ltd. “After a week where Korean stocks have been whipsawed by a leveraged unwind, investors should expect the volatility to stay elevated. But when the fundamentals are this solid, the market follows.”
