South Korea's stock-market boom collapses spectacularly as KOSPI loses $2.18 trillion in value amid regulatory scrutiny

South Korea's KOSPI index has experienced a dramatic collapse, losing $2.18 trillion in value over two trading sessions. The index fell by 12.6% in one day, closing at 5,663.24 after triggering market-wide circuit breakers for the second consecutive day.

The decline has been attributed to regulatory scrutiny over single-stock leveraged ETFs, which Finance Minister Koo Yun-cheol acknowledged had not been adequately considered before their introduction. He stated, "The products warranted closer study before launch."

In response to the crisis, the government is reviewing market stabilization measures, including individual investment limits and higher trading costs to deter excessive trading. The Ministry of Finance announced plans to impose a cap of up to 20% of an investor's total investment amount on these products.

The KOSPI has dropped 32.54%, or 2,731.41 points, over the past month, with a loss of 1,092.51 points in just two sessions. On July 28, the market value fell by 600.33 trillion won, followed by a further 264.20 trillion won drop on July 29. This unprecedented situation marks the first time circuit breakers have been activated on consecutive trading days.

As the government convenes emergency meetings to address the crisis, analysts are concerned about the implications of leveraged trading on market stability.