---
title: "South Korean Government 'Will Not Bail Out Market for Now,' Says Stabilization Fund Unnecessary; Stock Plunge Not Solely Due to Leveraged ETFs"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/294160940.md"
description: "Kim Yong-beom, Head of the Presidential Policy Office at the Blue House, stated that the current situation \"does not require separate stock market stabilization measures.\" He characterized the recent plunge as a \"reassessment process\" as the market seeks an equilibrium price, attributing it to structural issues such as active retail trading, proliferation of derivatives, and excessive weighting of semiconductor leaders. This statement triggered a strong backlash from retail investors, who criticized the government for previously hyping up market entry while now shirking responsibility amid the crash"
datetime: "2026-07-29T07:12:36.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/294160940.md)
  - [en](https://longbridge.com/en/news/294160940.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/294160940.md)
---

# South Korean Government 'Will Not Bail Out Market for Now,' Says Stabilization Fund Unnecessary; Stock Plunge Not Solely Due to Leveraged ETFs

The South Korean stock market triggered circuit breakers for two consecutive trading sessions. On Tuesday, the KOSPI plummeted by more than 12% during intraday trading, triggering the circuit breaker mechanism for the second straight day and falling below the 5,300-point mark. The cumulative decline from its historical high has exceeded 43%. Panic spread rapidly across the market.

Amid massive losses for retail investors and public pressure, Kim Yong-beom, Head of the Presidential Policy Office at the Blue House, who is currently accompanying President Lee Jae-myung on a visit to Brazil, stated that the government is closely monitoring the market and that **it is not yet time to activate the Stock Market Stabilization Fund**. He **characterized** this round of sharp declines as a **"reassessment process" as the market seeks an equilibrium price,** pointing out that the focus will be on studying which structural factors amplified the current volatility, with further measures to be taken as appropriate.

According to a July 29 report by the Korean media outlet JoongAng Ilbo, Kim Yong-beom pointed out at a press conference in São Paulo, Brazil, that expansion moves by Chinese memory chip companies such as CXMT (ChangXin Memory Technologies), along with market doubts about whether large-scale AI investments can translate into actual revenue, were important external triggers for this decline.

He also **attributed the high volatility of the South Korean stock market to structural issues such as active retail trading, a flood of derivatives, and excessively high weightings of leading semiconductor stocks, distancing leveraged ETFs from primary blame by stating, "We cannot attribute all problems to that single cause."**

Korean media outlet Fntoday reported that the above remarks quickly sparked a strong backlash in online communities and among investor groups in South Korea. Critics argued that **the government had previously hyped up the market to attract retail investors, but is now shirking responsibility by citing "market self-regulation" amid the crash, displaying contradictory attitudes.**

## Blue House: Market Is Seeking Equilibrium, No Policy Intervention Needed

According to reports, Kim Yong-beom characterized the recent decline at the São Paulo press conference as a "reassessment process" of the AI industry's growth potential, viewing it as a natural stage in the market's search for an equilibrium price rather than a crisis requiring government intervention.

Citing expansion plans by Chinese memory chip companies like CXMT as external shock factors, he stated, "From China's perspective, CXMT is a key enterprise being cultivated at the national level. In the long run, China may achieve rapid rise through technological advantages," interpreting this as a signal for the South Korean semiconductor industry to increase investment rather than a pessimistic sign. He emphasized that **"the actual demand for AI and semiconductors is not a transient phenomenon; demand will remain robust and sustained."**

Regarding the issue of leveraged ETFs, Kim Yong-beom stated that the Financial Services Commission would continue to promote related institutional improvements, but also pointed out **the need to examine the roots of volatility from a broader perspective, including derivative structures and investor composition, and planned to jointly review market volatility issues with the Financial Services Commission and the Financial Supervisory Service.**

## Structural Vulnerabilities: Retail Investors, Derivatives, and Semiconductor Concentration

Kim Yong-beom attributed the causes of the abnormally high volatility in the South Korean stock market to three structural factors: **extremely active trading by retail investors, a vast number of related derivative products, and the excessively high market weightings of Samsung Electronics and SK Hynix.**

He pointed out that South Korean stock price movements are highly correlated with the Philadelphia Semiconductor Index, stating, "Whenever debates arise around AI and semiconductors, the South Korean market may exhibit the highest volatility globally." This structural feature means that as long as there is any disturbance in the semiconductor industry narrative, the South Korean market will bear the brunt.

Kim Yong-beom also mentioned that **issues related to leveraged ETFs have become particularly prominent since late May, but emphasized that not all problems should be blamed on this single factor, necessitating a systematic review of the overall capital market structure.**

## Retail Investor Anger: Government Hyped Entry, Then Shifted Blame After Crash

The Blue House's calm response ignited a strong backlash among retail investors.

Reports indicated that critics pointed out that the current administration had loudly proclaimed targets of "KOSPI 5,000" or even "9,000" at the beginning of its term, attracting a large number of retail investors into the market. However, as the market fell sharply from its highs and most investors sank into losses, officials refused to accept policy responsibility, citing "market self-regulation" and "structural reasons."

Online comment sections were filled with similar sentiments:

> "The government encouraged retail investors to enter the market back then. Now that the market has crashed, instead of admitting mistakes, they say it's someone else's problem."
> 
> "The government bears undeniable responsibility for market overheating and severe volatility. Claiming that stabilization measures are unnecessary at this time is truly shirking responsibility."

Some investors also criticized President Lee Jae-myung for remaining silent on the stock market plunge, arguing that the absence and indifferent attitude of senior government officials were unacceptable while many people suffered significant losses. Analysts predict that as market volatility continues, **pressure for policy accountability from retail investors and opposition parties will further intensify.**

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