KOSPI Plunges 7% in 3 Minutes on July 2, Leveraged ETF Rebalancing Blamed

According to Herald Economy, South Korea's KOSPI index plummeted 7.89% to 7648.09 on July 2 afternoon, with the sharpest decline occurring in just 3 minutes around market close. Institutional investors' net selling surged to 2.0825 trillion Korean won in the final minutes, up from only 114.6 billion won at 3:30 PM, according to Koscom data.

Analysts attribute the rapid selloff to rebalancing and hedging activities in single-stock leveraged ETFs concentrated in semiconductor names like Samsung Electronics and SK Hynix. These products adjust daily exposure at market close, amplifying downward pressure when underlying assets experience sharp moves. Financial investment firms and asset management fund accounts accounted for 82.3% of institutional net selling that day.