South Korea's Kospi 200 has surged 113 per cent this year, propelling the market past Canada to become the world's seventh-largest. Yet the rally rests on a dangerously narrow base: Samsung and SK Hynix now command more than 50 per cent of the index, up from 36 per cent in January. Goldman Sachs notes this concentration dwarfs even the US Magnificent Seven's one-third share of the S&P 500. Capitalising on the momentum, SK Hynix launched a $28bn US share listing this week.

Leveraged exchange-traded funds are amplifying the volatility. The KODEX SK Hynix Single Stock Leverage ETF, with $3.4bn in net assets, rebalances daily to maintain 2X exposure — forcing market makers to buy when prices rise and sell when they fall. Trading has been halted four times in the past month. A former presidential candidate demanded the funds be delisted, calling them a "complete policy failure" that destroys "trillions of won in corporate value and public wealth daily."

The Bank of Korea warned over the weekend that retail investors face widening losses. Foreign investors, however, are already retreating, which Bank of Singapore's Mansoor Mohi-uddin says may limit spillover risk. Yet as Société Générale observed, a national market behaving like a sector sub-index — mirroring Taiwan's TSMC dependence — offers little confidence for long-term stability.