Bear Markets, Crypto Clarity: South Korea and Japan Navigate Structural Strain

South Korea's Kospi stock market has entered a technical bear market after dropping 20% from its recent peak, following an extraordinary run that saw it jump 116% this year. The index had lifted South Korea to the world's sixth-largest stock market.

The reversal is attributed to leverage fueled by retail investors piling into single-stock ETFs tied to Samsung Electronics and SK Hynix, seeking exposure to artificial intelligence with borrowed money. Outstanding leveraged bets hit a record 29.2 trillion won in early July, roughly $19.7 billion.

Analysts warn that Korean stocks could amplify sentiment across global technology markets given their high leverage. The comparison is often drawn to China's meltdown in 2015, when margin debt and a retail frenzy preceded a meltdown that erased trillions.

In Japan, the Nikkei 225 slid again on Friday, trading near its lowest levels in over a month, as heavy selling in chip-related names dragged it lower. Tokyo Electron, Advantest, and SoftBank Group all posted steep losses, while Taiwanese shares fell alongside them.