South Korea's stock market has experienced a sharp selloff, but Korea Exchange CEO Jeong Eun-bo emphasized that this is not due to a loss of confidence among foreign investors. Instead, Jeong attributed the recent volatility to external factors such as the Iran war, the inherent volatility of the semiconductor industry, and the need for portfolio rebalancing after significant market gains in 2025 and early 2026 [1].
The Kospi index had surged 76% in 2025 and was up 108.85% year to date before the selloff began on June 3, 2026. Following its record high on June 2, the benchmark Kospi fell more than 13% in just six sessions [1]. Jeong explained that these gains led to a substantial increase in South Korea's weighting in global portfolios, making rebalancing by foreign institutional investors inevitable. He stated, "As a general rule, foreign institutional investors maintain set portfolio allocation targets... As a result, rebalancing is inevitable, and in that process, foreign investors have been selling Korean stocks" [1].
On Monday, overseas investors sold a net 1.24 trillion won (about $801 million) worth of Kospi-listed shares as of 11 a.m. Singapore time, according to Korea Exchange data. Circuit breakers were triggered as the Kospi tumbled beyond 8% on that day [1]. Goldman Sachs analysts estimated that net foreign outflows from the Kospi reached roughly $62 billion as of late May 2026 [1].
The selloff also impacted the South Korean won, which weakened to a 17-year low of 1,561.5 against the dollar on June 5. Jeong noted that the won, being a local rather than a global reserve currency, is more susceptible to capital outflows, but authorities have been "actively conducting smoothing operations" to stabilize the currency [1]. He expressed confidence that as the rebalancing process concludes, pressure on the foreign exchange market will ease and conditions will normalize [1].
CONCLUSION
The recent selloff in South Korea's stock market is primarily attributed to portfolio rebalancing by foreign investors after substantial market gains, not a loss of confidence in the country's fundamentals. Market volatility and currency weakness are expected to subside as this rebalancing phase ends, according to the Korea Exchange CEO.