President Lee Jae-myung faces mounting political pressure as South Korea's KOSPI index closed at 6,023.66 on July 28, plunging 732.09 points (10.84%) in a single session. The sharp decline marks a dramatic reversal from the market's surge under Lee's administration, which saw KOSPI rise from 2700 on his inauguration day to a peak of 9000 in June. The market downturn follows Lee's Democratic Party landslide victory in the June 3 local elections, where the party secured 12 of 16 mayoral races, and comes as investor sentiment sours over volatile single-stock leverage ETF products and regulatory missteps. The KOSPI rally had been driven by a global semiconductor supercycle benefiting Samsung Electronics and SK Hynix, fueling Lee's approval ratings into the 60% range and prompting online praise dubbing him 'God Jae-myung.' However, repeated circuit breakers and side-car triggers since June have transformed the stock market from a political asset into a liability, with analysts warning that simultaneous real estate price surges and equity losses could provoke significant public backlash.
KOSPI Surges from 2700 to 9000 Under Lee Administration
KOSPI traded in a box range during the previous Yoon Seok-yeol administration, earning South Korea the dishonor of ranking last among major global stock markets in returns. The phrase "escaping the domestic market is in order of intelligence" became a popular saying as domestic retail investors suffered losses while those investing in US tech giants like NVIDIA, Apple, and Tesla reaped substantial gains.
The situation reversed sharply after Lee Jae-myung's government took office. KOSPI entered a sustained bull market, driven by an artificial intelligence boom and semiconductor supercycle that lifted Samsung Electronics and SK Hynix stock prices daily. The index crossed 5000 in January, seven months after Lee's inauguration, and reached 9000 in June. The rally propelled Lee's Democratic Party to a commanding victory in the June 3 local elections, winning 12 of 16 mayoral races (with the National Power Party winning Seoul, Daegu, North Gyeongsang, and South Gyeongsang).
Lee expressed confidence in the market's trajectory during his July 8 first-anniversary press conference, stating: "The abnormal stock market is normalizing. Our stock market was excessively suppressed. If we just prevent stock manipulation, duplicate listings, and physical splits, the index will exceed 5000." Online stock communities at the time featured calls for presidential term extensions and the moniker "God Jae-myung" (갓재명).
Han Dong-hoon of the National Power Party countered in March that "the KOSPI rise is not due to Lee Jae-myung's Democratic Party policies but mainly due to the global semiconductor cycle. Even if President Yoon Seok-yeol were still in office, the index would have reached 5000-6000." Public opinion, however, overwhelmingly credited Lee, with his approval ratings climbing into the 60% range.
Market Volatility Intensifies After June 3 Local Elections
Following the June 3 local elections, KOSPI experienced extreme volatility that observers compared to cryptocurrency markets. Circuit breakers and side-car mechanisms triggered repeatedly, with buy and sell side-cars activating for 10 consecutive trading days on one occasion. After July, the index entered a sustained decline.
Critics attributed the volatility to excessive capital concentration in single-stock leveraged ETFs for Samsung Electronics and SK Hynix. Lee Chan-jin, Governor of the Financial Supervisory Service, expressed regret over approving these products, stating: "I wonder if I should have laid down and blocked it at the time." Individual investors who had praised Lee as "God Jae-myung" grew increasingly critical.
Lee shifted to a cautious tone, acknowledging: "Stock market participants believe they have suffered damage due to increased volatility and larger price drops." He promptly ordered the preparation of supplementary measures. Yoo Seung-min, former National Power Party lawmaker, criticized Lee's response: "The responsibility for pushing single-stock leverage ETFs lies with the Blue House, and the victims are investors. This is not the time for the president to watch from across the river, telling the FSS Governor 'you're taking a lot of hits.'"
Political Analysts Warn of Public Backlash Over Market Losses
Shin Yul, professor at Myongji University, warned of escalating political risks: "President Lee Jae-myung made remarks to the effect of 'make money in stocks, not real estate,' but real estate prices have surged while the stock market has collapsed, leaving all citizens with losses. With public sentiment already uneasy ahead of the real estate tax reform announcement, if KOSPI's volatility-driven decline continues, the possibility of facing tremendous public resistance cannot be ruled out."
The KOSPI's fall from 9000 to barely holding the 6000 level represents a decline of more than half from its peak. The July 28 closing price of 6,023.66 marked a 10.84% single-day drop, with the KOSDAQ index also falling 59.01 points (7.72%) to close at 705.85, attributed to a sharp decline in US semiconductor stocks.
FAQ
What caused KOSPI to fall 10.84% on July 28?
KOSPI closed at 6,023.66 on July 28, down 732.09 points (10.84%), with the decline attributed to a sharp drop in US semiconductor stocks. The KOSDAQ index also fell 59.01 points (7.72%) to 705.85 on the same day.
How did KOSPI perform under President Lee Jae-myung's administration before the recent decline?
KOSPI rose from 2700 on Lee's inauguration day to 5000 in January (seven months later) and reached a peak of 9000 in June. The rally was driven by a global semiconductor supercycle benefiting Samsung Electronics and SK Hynix, contributing to Lee's approval ratings climbing into the 60% range and his Democratic Party winning 12 of 16 mayoral races in the June 3 local elections.
Why did Lee Chan-jin of the Financial Supervisory Service express regret over single-stock leverage ETFs?
Lee Chan-jin stated "I wonder if I should have laid down and blocked it at the time," expressing regret over approving single-stock leveraged ETFs for Samsung Electronics and SK Hynix. Critics attributed KOSPI's extreme volatility and investor losses after June to excessive capital concentration in these products, which triggered repeated circuit breakers and side-car mechanisms.
