Foreign Media: South Korea's "Ant Army" Leverage Bets Become a "Leading Indicator" for Global AI Stocks

There have been foreign media analyses stating that South Korea's 14 million retail investors, the so-called "ant army," are leading the global artificial intelligence (AI) investment frenzy. As seen in a Bloomberg News report on the 26th and the U.S. financial publication Barron's "canary in the coal mine" analysis, the South Korean stock market has established itself as a key indicator setting the direction for the global tech stock market. In fact, the $4.7 trillion South Korean stock market has shown a record-breaking rally, with the KOSPI surging nearly 200% over the past 12 months, driven by an explosion in demand for AI-related chips. This was backed by South Korean investors' blind buying of Samsung Electronics and SK Hynix, the core of the global AI hardware supply chain.

However, much like the warnings of market overheating such as the S&P 500 margin call incident recently pointed out by Seeking Alpha, the AI-driven rally is facing a headwind of steep volatility due to massive "debt investing" (leveraged investing). According to Bank of Korea data, the total amount of leveraged investments by South Korean retail investors has surged to a record high of 60 trillion won (approximately $39.3 billion). In particular, when high-risk leveraged ETFs tracking twice the daily returns of Samsung Electronics and SK Hynix were launched in late May, extreme "FOMO" sentiment kicked in, drawing in more than 350,000 investors in a short period. While these leveraged products double returns during a market upswing, they also amplify losses twofold during a downturn, acting as a trigger for margin calls and panic selling.

The structural vulnerabilities of the South Korean market were laid bare as the aftermath of Apple's price hikes reported by Reuters and the tech stock profit-taking sell-offs diagnosed by The Seattle Times struck Asian stock markets. As doubts arose over the outlook for global AI infrastructure investments, the KOSPI index plunged more than 8% intraday, triggering circuit breakers, and plummeted by 10% in just one week. Bloomberg pointed out the abnormal concentration where just two stocks, Samsung Electronics and SK Hynix, account for more than half of the KOSPI's total market capitalization, noting that the South Korean market could serve as a perfect "cautionary tale" showing how a market can collapse when capital is excessively concentrated in a single direction.

Regarding this extreme volatility, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok and financial authorities expressed strong concerns, stating, "Excessive concentration can pose a serious threat to the nation's financial stability." However, positive market outlooks still exist. Timothy Moe, Chief Asia-Pacific Equity Strategist at Goldman Sachs, assessed the current situation as a "technical correction" within a long-term bull market, predicting that the South Korean stock market's fundamentals are very solid and will break record highs again in the future.

Overall, major foreign media outlets agree that the aggressive capital movements of the 14 million "ant army" are having a massive impact on global AI and tech stock trends, and this could directly lead to increased volatility in Asian stock markets for the time being. Global investors are now looking to the direction of the South Korean KOSPI market to find the answer to whether the current AI frenzy is a sustainable revolution or a bubble on the verge of collapse.