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Korean Stock Surge Stokes Fears of Policy-Driven Bubble
13 Nov
Summary
- Korean benchmark Kospi index up over 70% in 2025
- Surge driven by AI-fueled semiconductor boom
- Margin loans and leveraged investing surging, raising volatility risks
As of November 13, 2025, Korea's benchmark Kospi index has risen more than 70% this year, the highest gain among global indexes. Much of this momentum has come from the booming semiconductor industry, driven by the rapid growth of artificial intelligence (AI) technology.
However, beneath the rally lies growing unease. The volatility index, VKOSPI, has spiked to 44, far above the stable range of 10 to 20, signaling heightened market sensitivity. Investor deposits have reached a record 88 trillion won ($60 billion), and margin loans stand at 26 trillion won. The ratio of margin loans to deposits is about 30%, raising concerns about the surge in debt-financed investing.
Some analysts warn that the AI-driven profits may be inflated, and a global correction could hit Korea's market hard. Despite these risks, the government appears determined to keep pushing stocks higher, even setting the "Kospi 5,000" as its target. Regulators have been criticized for their lax stance, with one official recently stating that "leveraged investing is just another form of investment."
Authorities must act quickly to curb the risks of excessive leverage. Tightening controls on margin loan limits, strengthening investor alert systems, and channeling idle real estate capital into productive equity investment will be crucial to building a sustainable bull market based on stronger economic fundamentals, not speculative borrowing.
