South Korea Monitors Stock Volatility Driven by Semiconductor Sector

South Korean economic policymakers, led by Finance Minister Koo Yun-cheol, agreed on Wednesday to closely monitor risk factors contributing to stock market volatility. The decision follows a period of sharp swings in major semiconductor stocks, such as Samsung Electronics and SK Hynix, which led the KOSPI index to trigger circuit breakers six times this year.

The Ministry of Economy and Finance attributed the instability to shifting expectations for the global AI sector, portfolio rebalancing, and profit-taking by institutional and foreign investors. The ministry noted that the high concentration of the semiconductor sector has increased financial market volatility and amplified the impact of chip sector fluctuations on the overall stock market.

To mitigate these risks, the Financial Supervisory Service will monitor the effects of newly introduced single-stock leveraged exchange-traded funds (ETFs) and review the marketing practices of asset management firms. The Bank of Korea warned that these specific leveraged ETFs may exacerbate volatility by encouraging one-sided trading and increasing stock concentration.