S. Korea market volatility near record as foreigners sell $13 billion
Currency dealers watch exchange rates as an electronic screen (top) displays South Korea’s benchmark stock index (KOSPI) in a foreign exchange trading room at Hana Bank headquarters in Seoul on March 13, 2026.
Jung Yeon-je | Afp | Getty Images
Volatility on the South Korean stock market rose to near-record levels on Monday after foreign investors sold $13.2 billion worth of local stocks last week, causing sharp fluctuations in the Kospi and a short-term trading restriction on the exchange.
The Kospi fell as much as 4% in early trading, further extending Friday’s 6% slide, which Goldman Sachs described as “erasing weekly gains amid the Trump-Xi Summit and strong foreign outflows.”
The Kospi Volatility Index rose 2.56% on Monday, approaching the peaks seen in early March.
Overseas investors pulled nearly $17 billion from emerging Asian markets outside China last week, marking the second-largest weekly outflow in history, according to data from Goldman Sachs. South Korea accounted for the bulk of the sales with an outflow of $13.2 billion, followed by Taiwan with an outflow of $2.5 billion.
South Korea’s stock exchange briefly halted some program trading on Monday after sharp losses in stock futures triggered a so-called “basket” mechanism aimed at calming market volatility. The restriction was activated after Kospi 200 futures lost 5% and automated trading activity was paused for five minutes.
South Korea’s year-to-date performance
The reversal comes after the Kospi index crossed the 8,000 mark for the first time last week; driven by interest in AI-related stocks, chip makers and retail momentum.
Strategists at Citigroup said the Korean market currently appears “much more overbought than in the U.S.,” leading the bank to reduce exposure to the Korean uptrend.
“While we think it is too early in tightening financial conditions for the bull market to pull back sharply or end thanks to interest rates, the Kospi appears much more overbought relative to the US and prudence suggests we take profits on half our position,” Citi strategists wrote.
Korea is showing more warning signs of the “enthusiasm” of local retail investors, the bank said. This group has emerged as key buyers of South Korean stocks this year, often accumulating through margin trading and leveraged exchange-traded funds.
While this doesn’t mean the Kospi trade is over, “it does mean risks are increasing,” Citi said.
The statements underscore growing concerns that rising global bond yields and geopolitical tensions are starting to weigh on some of Asia’s best-performing stock markets. Citi noted an “explosion in back-end yields” globally, with both Japanese government bond yields and UK gilt bond yields rising sharply amid concerns about ongoing inflation and high oil prices linked to the Iran conflict.
Still, both Citi and Goldman see potential for South Korea’s rally to continue. Goldman estimates Korean retail traders bought $14.1 billion worth of stocks last week. Citi said it took a profit on half of the Korean trade, not a full withdrawal, as it also expects the market to be among the biggest beneficiaries of passive inflows in connection with the rebalancing of index provider MSCI.
