Investors last week pulled a record $1.2 billion from two major exchange-traded funds tracking South Korean equities, signaling a potential pause in a market that has led global gains this year. The iShares MSCI South Korea ETF saw a record $970 million in outflows, while the Direxion Daily MSCI South Korea Bull 3X Shares ETF lost $240 million.
"The AI infrastructure cycle has been a huge tailwind for South Korea, but the market is starting to look overbought," said Michael Kim, an equity strategist at Kookmin Asset Management. "After a 75 percent run-up this year, it's natural for investors to take some profits off the table."
The withdrawals come after a stunning rally that saw South Korea's benchmark Kospi index surge past 7,000, driven by a global boom in artificial intelligence-related stocks. Samsung Electronics, a heavyweight in the index, recently saw its market valuation pass $1 trillion, a first for the company. The Kospi is up about 75 percent this year, making it the best-performing major stock market globally in 2026.
This massive capital outflow could signal a peak in the South Korean stock market rally, potentially triggering further profit-taking and leading to a short-term market correction. It reflects a growing belief among investors that the rally's momentum is fading and could increase downward pressure on South Korean equities, even as the long-term outlook for the country's chip-making giants remains strong.
The AI-driven rally has been a key factor in the global market's resilience, even in the face of a significant oil price shock stemming from the conflict in the Middle East. West Texas Intermediate futures have hovered around $99 a barrel, and Brent crude has been trading above $104.
Despite the outflows, the South Korean market has been a magnet for foreign investment this year, with billions of dollars pouring into AI-linked stocks. The government's efforts to improve corporate governance and boost shareholder returns have also helped to attract investors.
This article is for informational purposes only and does not constitute investment advice.
