Why South Korea Now Moves Global Markets

International investors now track the Kospi alongside major indices like the Nasdaq 100, as the correlation between them has nearly tripled. Its AI and semiconductor companies are driving this shift, making it a daily reference point for fund managers worldwide.

The Kospi remains up 62% for the year, but it has fallen 25% from its June peak. That rout has wiped out nearly $1 trillion in market value. A mix of heightened volatility and leveraged trading has amplified the swings.

Global Fund Managers Are Watching Seoul Closely

For the first time in 14 years, Tai Hui, chief Asia market strategist at JPMorgan Asset Management, presented on Seoul’s market to his global team, according to the report. Japanese traders are adding the Kospi Index to their watch lists. Andrew Jackson, head of Japan equity strategy at Ortus Advisors, added a Kospi chart for close monitoring earlier this year — a first in his more than two decades covering the area.

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The statistical relationship between Seoul and major global indices is strengthening.

The 60-day correlation between the Nasdaq 100 and the Kospi climbed to 0.46, nearly triple its five-year average of 0.16, according to data compiled by Bloomberg. The Nasdaq 100’s sensitivity to the index during Korean market weakness reached its highest level since 1990 on July 7. A similar gauge for the MSCI World Index hit a four-year high earlier this month, and the link between the Kospi and Japan’s Nikkei 225 has also surged.

Leverage Amplifies the Market’s Swings

The market’s growing influence is tied to high volatility. A local selloff triggered a near 9% drop in the Kospi, dragging down SK Hynix’s US-listed shares by 9.3%. The index’s chipmaker duo have both lost at least 30% of their value since the peak. South Korea temporarily halted new listings of single-stock leveraged exchange-traded products to curb speculation.

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International chip peers were sold off on Friday as a surprise breakthrough from a Chinese AI startup renewed doubts over massive capital expenditure.

International investors are paying attention.

The correlation figures and the behavior of professional traders suggest it is no longer just a regional index.