While Korea was closed Friday, the chips are still down for memory stocks

Nobuo Hayasaka, President and CEO of Kioxia Holdings Corporation, rings a bell mark the company's debut on the Tokyo Stock Exchange in December 2024. Kioxia was the largest company in Japan but it's halved in the last month.

It was a bad week for "the ants," as South Korea's army of retail traders are known colloquially. 1.2 million of them were clobbered with margin calls. That's more than 3% of the country's adult population, illustrating the feverish extent of stock market speculation and the danger of leverage.

Those stats were provided in a desk note to clients Thursday by Goldman Sachs trader Ioannis Blekos, who added that, this week alone, around 350,000 retail accounts were liquidated amid the Korean market collapse KR:180721. However, while Korea remained closed Friday for its Constitution Day holiday, providing welcome respite for fund managers, the waves made by the Kospi sell-off were still washing up on other shores.

In Japan, declines were led by its premier semiconductor play and former market darling, Kioxia Holdings (JP:285A), which slumped 16% and other chip maker plays like Ibiden (JP:4062), Tokyo Electron (JP:8035) and Sumco (JP:3436) witnessed losses between 8% and 10%.

Despite announcing a beat-and-raise in a splendid second-quarter earnings release Thursday, Taiwan Semiconductor Manufacturing Company (TW:2330) finally succumbed to gravity and dropped 7%.

Those losses followed on from another hefty retreat in the Philadelphia Semiconductor Index SOX. Its 4% drop on Thursday took its 2026 peak-to-trough decline to 19% and the cusp of a technical bear market.

It's important to put these dramatic share-price reversals into context. Kioxia Holdings has delivered a return to investors of 359% in 2026, TSMC 44%, SK Hynix (KR:000660) 172% and Samsung 112% (KR:005930). Moreover earnings forecasts are rising as stocks are falling so the valuations on most semiconductor plays are becoming more compelling.

The wipeout in semiconductor sentiment reflects positioning more than fundamentals. Other than TSMC, both ASML (NL:ASML) and Micron $(MU)$ both recently announced very robust earnings. All the chip makers report that for the foreseeable future supply cannot meet demand.

In his Substack posting, "Dark Side of the Boom", though, market commentator Stephen Innes remarked on TSMC that when "good news cannot lift a stock, the market is no longer trading the news. It is trading the weight of everyone already sitting in the position."

Innes writes, "South Korea shows how quickly a normal correction can become mechanical when leverage, margin calls and rising volatility begin feeding one another."

Some positive nuggets are starting to emerge from the rubble, however. In his weekly 'fund flow insights' published Friday, Citi's David Chew revealed that Korea and Taiwan exchange-traded funds saw an influx this week of $6.4 billion and $2.8 billion respectively . He also observed that after months of heavy international outflows from Korea, this last week witnessed a $500 million inflow in an encouraging trend reversal.

In China, the $8.6 billion IPO of semiconductor company CXMT was 250 times oversubscribed, indicating investor enthusiasm for the sector still.

Separately, steps announced by the Financial Services Commission in Korea to triple the minimum deposit required to open a brokerage account and to prohibit the issuance of new leveraged products on its benchmark heavyweights should help to impose some form of order on the domestic market.

-Jules Rimmer

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July 17, 2026 05:36 ET (09:36 GMT)

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