The KOSPI skyrocketed more than 170% in FY26 due to multiple factors, including the artificial intelligence (AI) tailwind.

South Korean chip makers Samsung Electronics and SK Hynix Inc surged a crazy 459% and 807%, respectively, in FY26.

They make up about half of the market's total market cap, which means KOSPI is a concentrated bet despite being home to 800 stocks.

It's no surprise that after stock price gains like that, some investors got a bit wary and chose to take their profits and run.

That's one reason why the KOSPI crashed on 23 June, falling 10% in one day, and sparking a five-week sell-off.

SK Hynix shares lost just over half their value, and Samsung shares dropped 41% before the KOSPI bottomed out on 29 July.

Australian investors who own SK Hynix and Samsung shares directly felt the full force of that fall.

They also felt it via the iShares MSCI South Korea AUD ETF (ASX: IKO) — the Australian market's top performing ETF of FY26.

IKO ETF delivered an amazing total return of 171% in FY26. The ASX IKO unit price fell 37% during the KOSPI crash.

What's happened to KOSPI and IKO ETF since the crash?

For the record, IKO ETF doesn't track the KOSPI.

Instead, the fund seeks to mimic the performance of the MSCI Korea 25/50 Index before fees.

The MSCI Korea 25/50 Index focuses on South Korean large caps and mid caps, but in practical terms, it captures 85% of the KOSPI.

SK Hynix and Samsung Electronics make up 46% of the MSCI Korea 25/50 Index market cap.

IKO ETF has been trading for a long time.

Its inception was in the US in May 2000. It was listed on the ASX in November 2017.

IKO was subsequently restructured into an Australian-domiciled ETF in October 2018.

As reflected in IKO ETF's history in the chart above, the South Korean market has not been a strong performer over the long term.

There are many reasons for this, and it's summed up by what the professional traders used to call the 'Korea discount'.

We explain the Korea discount in an earlier story.

Despite its incredible 171% return in FY26, IKO remains a relatively small ASX ETF.

Aussie investors have put about $213 million into the ETF to date, according to ASX data.

That compares to $25.377 billion invested in the market's largest ETF, Vanguard Australian Shares Index ETF (ASX: VAS).

While small in comparative scale, it's worth noting the relatively rapid rise in investment in IKO ETF.

ASX investors piled in while watching the KOSPI's stratospheric rise.

Between January and June 2026 inclusive, IKO's funds under management rose 40%.

Australians are much more in-tune with overseas markets than they used to be.

Experts agree our home bias toward S&P/ASX 200 Index (ASX: XJO) shares is shifting.

Since bottoming out on 29 July, the KOSPI has rebounded 23%, and IKO has recovered 25%.

SK Hynix shares have lifted 20% and Samsung Electronics stock is 30% higher.

The AI investment megatrend has a long way to go.

As RMIT University finance professor Angel Zhong points out, markets "often move through cycles of exuberance and reassessment".

Zhong said AI would continue to transform industries:

The AI revolution is creating genuine economic opportunities, but markets often price in expectations long before those benefits are fully realised.

The post How the KOSPI crash impacted ASX investors appeared first on The Motley Fool Australia.

It's the benchmark index that tracks the performance of about 800 companies listed on South Korea's main stock exchange.

Many of them are household names: Samsung Electronics, Hyundai Motor Company, and LG Energy Solution.

Now get this.

In Australia's FY26 period, 1 July 2025 to 30 June 2026, the KOSPI skyrocketed by more than 170%.

Imagine the ASX 200 doing that.

Gobsmacking, right? (The ASX 200 rose by 3% in FY26.)

And the main driver of the KOSPI's extraordinary performance?

You may assume artificial intelligence (AI), given the staggering 807% share price rise for chipmaker SK Hynix Inc in FY26.

Not to mention the 459% share price surge for consumer retail giant, Samsung Electronics, which also makes AI chips.

While irrational exuberance over AI played a big role in KOSPI's seismic rise, there were other drivers, too.

Some of them, you won't believe. And they help explain the KOSPI's peak-to-trough crash of 44%.

Let's get into it.

Why did the KOSPI go stratospheric in FY26?

The first thing to know is that SK Hynix and Samsung Electronics represent about half of the KOSPI's total market capitalisation.

That's nuts!

By comparison, BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA) make up about 20% of the ASX 200.

But I digress.

SK Hynix and Samsung shares have become bellwethers for the global AI boom.

The companies are key global suppliers of critical hardware used in artificial intelligence infrastructure.

In particular, they supply high-bandwidth memory (HBM) chips used for powering modern systems designed by companies like Nvidia.

Being 50% of the index, SK Hynix and Samsung make the KOSPI incredibly tech-heavy and exposed to AI volatility.

That means it can strongly run on market exuberance, and severely contract on market fear.

In FY26, as SK Hynix and Samsung shares soared, they pushed the KOSPI higher.

More investors, including foreigners buying directly or via exchange-traded funds (ETFs) on their local exchanges, piled in to what you might call South Korea's Magnificent Two.

Now we look at the lesser-known factors behind the KOSPI's astronomical rise.

AI sentiment not the only driver of KOSPI's boom and bust

South Korea, which has long been considered a 'developing market', got a new president in 2025.

The KOSPI didn't command much interest from investors despite its household names.

New President Lee Jae Myung wanted to change that.

He saw a role for the KOSPI in stimulating the economy, raising per capita wealth, and attracting overseas investment amid the AI boom.

The first step was overcoming the 'Korea discount'.

The Korea discount refers to the tendency for KOSPI stocks to trade at lower valuations than similar companies around the world.

The main reasons for this included corporate governance concerns, low shareholder returns, and lenient regulatory oversight.

Shortly after his inauguration in June 2025, President Lee said:

At the core of a capitalist economy lies the stock market.

The most important task is to resolve, or at least alleviate, the unfairness and opacity of the stock market.

New rules were brought in to stamp out insider trading and market manipulation, and force company boards to act in the best interests of shareholders.

Sounds like a positive change for investors, but here's the potentially problematic part.

Government encourages ordinary citizens to jump in

President Lee actively sought to make the South Korean stock market more appealing to ordinary citizens.

President Lee said (courtesy The Korea Herald):

If equities become an alternative investment destination that people find as attractive as real estate, then by allowing people to get more dividends and make money to cover living costs, companies will find it easier to attract capital, and a virtuous cycle will be created.

The President pledged to incentivise companies to pay higher dividends, thereby making investment more attractive.

On top of that, the rules around using debt to buy shares were loosened, which enabled greater access to the market.

Ordinary South Koreans jumped in, and between June and December 2025, the KOSPI rose more than 50%.

So, it wasn't just the extraordinary profits from SK Hynix and Samsung driving the market higher.

The sheer volume of new and inexperienced investors ploughing newly accessible funds into the market also pushed the KOSPI up.

Want to double your bet?

Then came the opportunity to leverage the KOSPI's astronomical gains, also courtesy of new government policy.

In April, South Korea followed other international markets in allowing single-stock leveraged ETFs to trade on the KOSPI.

Of course, SK Hynix and Samsung dominated these ETFs because of their runaway share price growth.

The leveraged element meant that stock price movements were amplified either way.

KB Financial Group estimates South Korean citizens have already invested a net $US9.7 billion into these single-stock leveraged ETFs.

Foreign investors have bought a net $US1.4 billion, according to abc.net.au.

The ability to leverage gains led to many investors making life-changing money.

We're talking tens of thousands of dollars, and in some cases, hundreds of thousands of dollars.

The KOSPI continued rising after the introduction of leveraged single-stock ETFs until it peaked on 19 June.

Then came the fall.

A cataclysmic 44% dive in just five weeks.

Suddenly, a bear wanders into the tent

As is inevitable after a period of crazy growth, the KOSPI got the wobbles in late June.

Investors became worried about high stock valuations and the sustainability of massive AI capex spending.

The KOSPI reversed course dramatically on 23 June, falling 10% in one day.

That was driven by a 12% plunge for both SK Hynix and Samsung Electronics shares.

The next day, AI-related stocks in the US followed suit.

Micron Technology Inc dropped 13%, Advanced Micro Devices Inc fell 6%, and Nvidia shares fell 4%.

The sell-off on US markets enhanced the panic in South Korea, and a five-week sell-off ensued.

Since then, SK Hynix shares have lost almost half their value, and Samsung shares are down 32%.

Angel Zhong, a finance professor at RMIT University who specialises in global financial markets, behaviour and trends, said the KOSPI's sell-off shows how quickly market optimism can turn.

What we're seeing in South Korea is a reminder of how quickly technology narratives can translate into market enthusiasm, and how quickly that enthusiasm can reverse. 

The AI revolution is creating genuine economic opportunities, but markets often price in expectations long before those benefits are fully realised. 

Profit-taking wasn't all that dragged the KOSPI into a bear market last month.

Investors who were late to the KOSPI party, sitting on smaller capital gains that were wiped out within days, received margin calls.

ABC reported Goldman Sachs estimates of more than 1.2 million margin calls and 360,000 forced account closures as of a fortnight ago.

A margin call occurs when your investment's value falls below your broker's required margin.

Typically, the broker asks for cash to make up the difference, and if you can't pay, they can sell your shares down.

So, forced sales also contributed to the KOSPI's market crash.

What now?

ASX investors who hold SK Hynix and Samsung shares directly obviously felt the impact.

Other Aussie investors felt it through the iShares MSCI South Korea AUD ETF (ASX: IKO), which was the best performer of FY26.

The IKO ETF unit price fell 36% during the KOSPI crash.

Since bottoming out on 29 July, the KOSPI has recovered 13%. IKO ETF has also rebounded 16%.

Zhong explained the lesson:

Investors should be careful not to mistake a correction in market sentiment for a failure of underlying technology.

AI will continue to transform industries, but markets often move through cycles of exuberance and reassessment. 

Meanwhile, South Korea's finance ministry has said it will move to limit access to leveraged ETFs.

The post Imagine the ASX 200 near-tripling in a year. That's what the KOSPI did in FY26 appeared first on The Motley Fool Australia.

SK Hynix Inc (NASDAQ: SKHY), the South Korean chipmaker that supplies the high-bandwidth memory sitting inside almost every Nvidia processor, sold 177.9 million American depositary shares at US$149 each on 9 July. The company raised approximately US$26.5 billion.

The securities began trading on the Nasdaq on 10 July under the ticker SKHY, closing their first session up approximately 13% at US$168.

That makes it the largest US listing ever by a foreign company, surpassing Alibaba's US$25 billion debut in 2014.

It is also the second-largest globally after SpaceX's US$85.7 billion Nasdaq listing in June.

Is this technically speaking a SK Hynix IPO?

Despite the headlines, this was not technically an IPO.

SK Hynix's common shares have traded on the Korea Exchange for decades, and the company was already valued above US$1 trillion before the US listing.

What happened last Friday was an American depositary share offering, creating a new US-traded security tied to an already-public business rather than floating a previously private company.

SK Hynix did not become a public company through this offering. However, it made itself far easier for American and international investors to own.

Why the AI memory story is important for ASX investors

SK Hynix reported revenue of 97.1 trillion won, approximately US$64.1 billion, in 2025, a company record.

Net income reached 42.9 trillion won, or approximately US$28.3 billion, implying a net profit margin of 44%.

Its Korea-listed shares have risen by more than 515% over the past 12 months as high-bandwidth memory has become a critical bottleneck in AI infrastructure.

The company captures approximately 56% of the global HBM market, according to its SEC filing.

For ASX investors, that AI memory demand story connects directly to two ASX-listed funds and one Australian company.

Global X Semiconductor ETF (ASX: SEMI)

The most direct ASX exposure to SK Hynix is through the Global X Semiconductor ETF.

SK Hynix is already one of SEMI's largest holdings, sitting alongside Micron, AMD, TSMC, and Nvidia.

SEMI holds just 30 companies tracking the Solactive Global Semiconductor 30 Index, making it a concentrated, high-conviction way to own the semiconductor supply chain from the ASX.

That concentration cuts both ways.

The fund is heavily exposed to the memory cycle, which has historically been one of the most volatile in technology. The sector has periods of shortage-driven price surges followed by oversupply and collapsing margins.

SK Hynix's own capital expenditure plans, including two new fabrication complexes in South Korea, are examples of capacity expansion that have triggered previous downturns.

Betashares Nasdaq 100 ETF (ASX: NDQ)

The Betashares Nasdaq 100 ETF is the other route, though the connection is less immediate.

SK Hynix's Nasdaq listing raises the prospect of eventual NASDAQ-100 Index (NASDAQ: NDX) inclusion. This would force every fund tracking that index, including NDQ, to buy SKHY.

That is the same dynamic that played out with SpaceX's fast-track inclusion earlier this month.

NDQ holders should understand that index inclusion is not automatic and would depend on SK Hynix meeting the exchange's eligibility criteria for foreign-domiciled ADRs.

NextDC Ltd (ASX: NXT)

NextDC is the Australian company most directly connected to the same underlying trend.

The AI memory shortage driving SK Hynix's extraordinary revenue growth stems from AI data centres consuming HBM faster than manufacturers can produce it.

NextDC builds and operates those data centres in Australia.

Contracted utilisation surged 60% to 667MW in the March 2026 quarter alone, and the company's forward order book is expected to generate contracted EBITDA in excess of A$1 billion.

Every dollar of SK Hynix's memory revenue reflects AI compute demand that must be housed somewhere, and in Australia, that increasingly means NextDC.

Foolish Takeaway for the SK Hynix IPO

SK Hynix's IPO is a landmark moment for the AI memory trade.

For ASX investors, SEMI provides the most direct exposure, NDQ offers a potential future index-inclusion angle, and NextDC captures the same underlying AI infrastructure demand from the Australian side.

But investors should remember that memory is a famously cyclical industry.

A wave of AI companies rushing to IPO at peak valuations has historically been a signal worth treating with caution rather than enthusiasm.

The post SK Hynix IPOs in the US. Here's what that means for ASX investors appeared first on The Motley Fool Australia.