South Korea Stock Chaos: Investors Lay Funeral Wreaths After ETF Rout as KOSPI Wipes $2T, Minister Apologises

South Korean retail investors placed funeral wreaths outside the National Assembly after a sharp stock market sell-off wiped more than $2 trillion from the value of domestic shares and prompted demands for tighter controls on leveraged investment products.

The protest followed a steep decline in the benchmark KOSPI index, which fell by around 40 per cent from its June peak as technology stocks, including Samsung Electronics and SK Hynix, came under heavy selling pressure.

South Korea's Deputy Prime Minister and Minister of Finance and Economy, Koo Yun-cheol, apologised over the government's decision to allow single-stock leveraged ETFs, saying officials had not fully considered how the products would perform after launch.

Investors Place Funeral Wreaths Outside Parliament

Retail investors gathered outside the National Assembly in Seoul and placed around 30 funeral wreaths as a protest against single-stock leveraged ETFs.

The demonstration was organised by the retail investor group Assembly for the Normalization of the Stock Market.

Messages displayed on the wreaths included, 'Abolish single-stock leveraged ETFs', 'Is investor protection just empty words?' and 'We'll get even with our votes'.

The investors called for the products to be banned and removed from the market, arguing that the leveraged ETFs increased losses during the sharp market decline.

The products, introduced in May, allowed investors to take leveraged positions linked to individual companies including Samsung Electronics and SK Hynix.

During the market rally, the ETFs attracted significant retail investment as investors sought greater exposure to South Korea's artificial intelligence semiconductor sector.

KOSPI Crash Wipes Trillions From Market Value

The protests came after one of the sharpest declines in South Korea's stock market in recent years.

The KOSPI dropped heavily over two consecutive trading sessions in late July, triggering market stabilisation measures and accelerating selling pressure.

The index fell roughly 40 per cent from its June record high, wiping more than $2 trillion from the value of South Korean equities.

The decline was led by losses in major technology companies, particularly semiconductor firms that had driven much of the earlier rally.

As share prices fell, investors holding leveraged products faced amplified losses because the funds are designed to magnify daily movements in their underlying assets.

Finance Minister Apologises Over Leveraged ETF Decision

South Korea's Deputy Prime Minister and Minister of Finance and Economy, Koo Yun-cheol, addressed lawmakers at the National Assembly and apologised over the introduction of single-stock leveraged ETFs.

'We sincerely apologise for not thoroughly considering how these products would perform after their launch,' Koo said.

He said the government was reviewing additional market stabilisation measures and could introduce further rules for leveraged investment products.

Asked about calls for his resignation, Koo said his focus was on stabilising financial markets.

The chairman of South Korea's Financial Services Commission also expressed regret over the issue.

South Korea Launches Debt Support Plan Amid Financial Pressure

South Korea had already announced plans for a nationwide debt counselling hotline as part of an 'Economic Crisis Family Suicide Prevention Plan' before the latest market turmoil.

The Financial Services Commission said the programme would provide support for people facing severe financial pressure linked to debt problems.

The initiative was not announced specifically in response to the KOSPI decline, but came as authorities raised concerns over rising household debt and financial stress.

Borrowing Fuelled Retail Investment Boom

The market downturn highlighted the risks faced by retail investors who used borrowed money to increase their exposure to stocks.

Margin lending and other forms of borrowing increased during the market rally as investors sought to benefit from rising technology shares.

When prices reversed, some investors faced forced selling as losses reached levels that triggered broker requirements.

The episode has increased scrutiny of leveraged investment products and the protections available to individual investors.

Government Reviews Market Rules After Sell-off

South Korean authorities are now reviewing whether additional restrictions are needed for single-stock leveraged ETFs and other high-risk investment products.

Officials have said they want to maintain market access while reducing risks for retail investors.

The government's response comes as South Korea attempts to stabilise markets following one of its most severe stock market declines in years.