The world's craziest stock market has become a nightmare journey

For most of the past year, South Korea enjoyed the hottest stock market in the world, fueled by the artificial intelligence boom. And then came the crash. Yoon Jae Yi, a 30-year-old English teacher, lost $19,000 of her investments. This caused her to cut back on living expenses: fewer taxi rides, fewer trips; and when she skips meals, she tells herself that at least it helps with her diet. South Korea, which brought the world "Squid Game" and K-pop, is currently home to the craziest stock market in the world, with dizzying volatility not seen in major markets for years. The main index, KOSPI, more than tripled its value in about a year and a half, against the backdrop of belief in the AI boom. The two local star stocks - memory chip manufacturers Samsung Electronics and SK Hynix - soared to a market value of trillions of dollars each and drove the market to record highs. But then, during six weeks in June-July, the KOSPI plunged by 40% and caused losses to hundreds of thousands of investors, a wake-up call for those betting big on the AI industry. Since then, the roller coaster has continued, and as of now, the index has recovered by about 20% from the low it reached.

"The volatility is just too extreme. This is not a prudent investment, it's a casino gambling table," said 68-year-old Jung Eui-jung, who heads the "Korea Shareholders Alliance," an organization representing the country's approximately 14 million private investors. The collapse of the KOSPI over six weeks wiped out about $2.5 trillion of its market value. The hardest hit were local private investors, who are responsible for 60% to 70% of the daily trading volume in the index. These are called "ants" - weak individually but powerful when they act together. They poured money into the market out of a deep belief in Samsung and SK Hynix, which dominate the production of two leading types of memory chips used to train and operate artificial intelligence systems. The "ants" demand protection.

The market fall was preceded by the launch in May of the first leveraged ETFs in South Korea that track a single stock. Using financial tools like debt and derivatives, the funds allowed "ant" investors to double their bet on Samsung and SK Hynix. This means that if one of the stocks rose by 5% on a given day, the leveraged ETF rose by 10%. However, the leverage also works in the opposite direction: if the stock fell by 5%, the fund fell by 10%. Now the "ants" are blaming the administration of South Korean President Lee Jae-myung for easing regulations and allowing the operation of such dangerous funds, which also carry the potential for high profits. In response, the government tightened trading rules for ETFs in an attempt to reduce market volatility. A group of private investors sent funeral wreaths to the National Assembly of South Korea, along with messages promising revenge at the ballot box and an urgent call: "The ants are being slaughtered! National Assembly, respond." The President's office stated that his government is doing everything in its power to deal with market volatility, including through new trading rules.