Korean stock rally turns, with SK plunge and bigger bonuses exposing strains
2026-08-14
South Korean shares surged on the memory-chip boom, drawing funds into SK Hynix and Samsung Electronics. But from the second half of June 2026, views spread that US tech giants were overinvesting in AI, and the market quickly reversed. Expectations of large bonuses and frustration among retail investors hit by falling shares are surfacing at the same time.
From a sharp KOSPI rise to a pullback
The Korea Composite Stock Price Index, or KOSPI, strengthened its upward trend around the time President Lee Jae-myung took office in June 2025. That was due not only to the government's long-running push to end the Korea discount, but also to rising expectations for stronger earnings at memory chip makers on the back of demand for artificial intelligence, or AI. Foreign investors also turned their attention to the South Korean market, and in June 2026 the KOSPI hit a record 9000, more than tripling over the past year.
However, once the view emerged in the second half of June 2026 that AI investment by major US tech firms was excessive, the tide turned. Selling spread, centring on SK Hynix and Samsung Electronics, and as of Aug. 12 the KOSPI stood at 6579, down just under 30% from its peak. Samsung Electronics fell 29% from its June high, while SK was down 48%. Both companies posted record quarterly profits in the April-June period, but market unease has not subsided.
Bonuses and the acceleration of talent competition
One factor said to have amplified swings in South Korean shares is the single-stock leveraged ETF introduced at the end of May. These products aim to deliver twice the movement of selected names such as Samsung and SK, and retail money flowed in. During the sharp July sell-off, the government took steps such as advance education for investors and purchase restrictions, but it is hard to deny the impression that it was playing catch-up. Frustration among retail investors who bought at high prices is strong.
The impact is not limited to the stock market. Net profit at Samsung Electronics and SK is expected to reach around 30 trillion yen in the year ending December 2026, and the industrial sector is watching where performance-based pay will go. SK Hynix has a system that returns 10% of operating profit to employees, and securities firm forecasts as of July put operating profit for the year ending December 2026 at 266 trillion won, or about 28 trillion yen. Given a workforce of about 40,000 people, simple arithmetic puts the annual bonus at as much as 70 million yen.
Samsung also saw labour unrest this spring. The Samsung Group Beyond Enterprise Union, a cross-group organisation, entered talks in May with a strike threat, prompting the South Korean prime minister to step in to mediate. The government estimated the economic loss from the strike at 100 trillion won, or about 10 trillion yen. In the end, the strike was avoided, and Samsung settled on paying bonuses on a par with SK in company stock. According to company estimates, the shares handed out in 2026 could be worth as much as 55 million yen per employee.
Widening sense of deprivation
The AI boom lifted bonuses and share prices at both companies, but it also exposed inequality in South Korean society. The focus is on a sense of deprivation. A female civil servant working at a central government ministry said: 'I don't own stocks, and my salary does not rise the way it does in the private sector. Hearing about easy money makes me feel deprived.'
In South Korea, semiconductors have helped support the economy, but the gap between those who benefit and those who do not has also widened. Jealousy and envy toward conglomerate companies swirl, and many people have turned to investing in hopes of benefiting from the rally. If the market falls apart, dissatisfaction will rise not only with companies but also with politics. The surge in memory prices is spreading distortions across South Korean society as a whole.
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