South Korean retail traders blame government after Kospi plunge and leveraged ETF backlash

South Korean individual investors, upset by July's sharp Kospi drop and volatile leveraged ETFs, are vowing to avoid the market and fault President Lee Jae Myung's reforms.

In July, South Korea's Kospi index fell 22% for the month, the steepest decline since the global financial crisis, leading retail investors to sell a record amount of shares despite a brief 18% rebound. Newcomers like Kim Han-kyung, who started investing in May, now pledge never to trade Korean stocks again, while others compare the market to a casino. The surge in single-stock leveraged ETFs, promoted by President Lee Jae Myung's reform drive, is blamed for amplifying price swings, resulting in four unprecedented circuit-breaker suspensions.

The government responded by temporarily halting new ETF listings and pledging additional stabilisation measures, though many traders consider the actions too delayed. Analysts note that volatility stems from concentrated bets on AI-linked chipmakers—Samsung Electronics and SK Hynix—whose shares remain strong year-to-date. Despite the turmoil, the broader AI boom continues to support the market, but rebuilding confidence among small investors may take longer than the index's recovery. The Korean Stockholders’ Alliance says anger toward the administration is at its peak.