Currency dealers monitor exchange rates as the Korean Standard Stock Price Index (KOSPI) is displayed on an electronic screen (above) in the foreign exchange dealing room of Hana Bank’s main branch in Seoul on March 13, 2026.
Jung Young Jae | AFP | Getty Images
Volatility in South Korea’s stock market soared to near record highs on Monday after foreign investors sold $13.2 billion worth of domestic stocks last week, causing a sharp rise in the Kospi and temporary trading restrictions on the exchange.
The Kospi fell as much as 4% in early trading, extending Friday’s 6% decline, which Goldman Sachs described as “the Trump-Xi summit and strong overseas capital outflows wiping out weekly gains.”
The Cospi Volatility Index rose 2.56% on Monday, close to the peak seen in early March.
Foreign investors withdrew about $17 billion from emerging markets in Asia excluding China last week, the second-largest weekly outflow on record, according to Goldman Sachs data. South Korea accounted for most of the selling with $13.2 billion in outflows, followed by Taiwan with $2.5 billion.
The Korea Exchange on Monday suspended some program trading after a sharp decline in stock index futures triggered a so-called “sidecar” mechanism aimed at calming market volatility. The restraining measures were triggered after Kospi 200 futures fell by 5%, and automated trading activity was suspended for 5 minutes.
Performance of Korean stocks since the beginning of the year
The reversal comes after the Kospi index soared above the 8,000 mark for the first time last week, fueled by enthusiasm over artificial intelligence stocks, chipmakers and retail momentum.
Citigroup strategists said the bank needs to reduce its exposure to bullish Korean trade because the Korean market currently appears “much more overbought than the U.S.”
“While we believe interest rates have made it too early to tighten financial conditions to significantly reverse or end the bull market, the Kospi appears to be much more overbought than the US, and a prudent bet would be to take profits on half of the position,” Citi strategists said.
The bank said South Korea is showing further signs of “enthusiasm” by domestic retail investors. The group has emerged as a major buyer of South Korean stocks this year, frequently making purchases through margin trading and leveraged exchange-traded funds.
It does not mean the Kospi trade is over, but “it does mean the risks have increased,” Citi said.
The comments underscored growing concerns that soaring global bond yields and geopolitical tensions are starting to weigh on some of Asia’s strongest stock markets. Citi said a “back-end yield breakout” was occurring globally, with both Japanese and British government bond yields rising sharply amid concerns about continued inflation related to the Iran conflict and soaring oil prices.
Still, Citi and Goldman think South Korea’s rally could continue. Goldman estimated that individual traders in South Korea bought $14.1 billion worth of stocks last week. Citi also said it had booked profits on half of its Korean trades (but not completely exited) as it expects the market to be one of the biggest beneficiaries of passive inflows related to index provider MSCI’s upcoming rebalancing.
