KOSPI doubles as Korean retail floods chip ETFs; crypto slips

South Korea’s benchmark KOSPI climbed 4.56% to a record 8,457 on Wednesday, marking a doubling in value year-to-date. The index added roughly $220 billion in market value in the session and about $900 billion over the month of May.

Samsung Electronics gained 6.5% and SK Hynix rose 9.5% on the day. The two chipmakers together represent about 42% of the index and have drawn attention because of demand for AI memory chips. The KOSPI is up roughly 100% year-to-date. An analyst at a major bank has raised a 12-month target for the index to 9,000, with a bullish scenario at 10,000.

Retail investors have concentrated flows into leveraged exchange-traded funds linked to the two chipmakers. A 2x SK Hynix ETF listed in Hong Kong has taken in about $1.3 billion year-to-date and grew to roughly $8 billion in assets over three months. A 2x Samsung ETF has seen similar inflows. Together, those leveraged funds now match or exceed the size of the largest single-stock leveraged ETFs tied to big U.S. tech names.

Market participants singled out memory-related stocks as the main driver of the gains. Heisenberg, a market commentator, observed: “Everything memory related has gone straight vertical.”

The surge in equities has coincided with a steep drop in domestic cryptocurrency trading. South Korea’s largest exchanges account for about 96% of local crypto volume, and won-denominated trading has fallen roughly 80% as liquidity shifted into the stock market. The difference between local and global Bitcoin prices, known as the kimchi premium, recently sat near negative 2.19%.

Korean policymakers and banks are taking steps to keep more digital-asset liquidity onshore. President Lee Jae-myung has backed the idea of a won-pegged stablecoin and a Bitcoin spot ETF. A group of eight banks, led by Kookmin, Shinhan and Woori, is preparing a regulated won-backed stablecoin framework under the Digital Asset Basic Act. Crypto exchanges remitted about $40 billion overseas in the first quarter, with stablecoins accounting for roughly half of that outflow.

Market history shows prior equity sell-offs can push retail funds back into crypto. On May 15 the KOSPI briefly traded above 8,000 intraday before falling 8.4% in one session, which wiped about $370 billion in market value and temporarily lifted crypto volumes. South Korea has an estimated 10 million crypto investors, more than 30% of the population.

A pause in chip orders, a sharp move in the won, or losses in leveraged ETF positions could trigger reallocations between equities and digital assets, market participants say. Regulators and banks are advancing onshore instruments as trading patterns change.