The South Korean stock market experienced one of its most violent reversals in recent memory last week. The KOSPI, the country's benchmark index, plummeted almost 8% in a single session last Thursday (as cited in a Reuters report), extending a brutal slide that has erased trillions of won in market value.
This sheer slump has put a spotlight squarely on South Korean stocks and, by extension, the exchange-traded funds (ETFs) that hold them.
Amid this backdrop, investors holding South Korean ETFs might be questioning whether this is a sign to exit the market or if this provides an entry point opportunity that needs to be seized.
To answer that question, investors must look closely at what led to the slump and whether it will last long or is just a temporary blip so that they can make an informed decision.
What Led to the Recent Slump?
The rout was not a broad-based economic failure but a highly concentrated shock emanating from the semiconductor sector.
The trigger was primarily a global AI selloff fueled by hotter-than-expected U.S. inflation data, which revived fears that interest rates would stay higher for longer. As a result, investors began questioning whether the massive capital expenditure on artificial intelligence would generate sustainable returns amid high rates and started to pull back from semiconductor stocks.
This caused memory chip giants, Samsung Electronics and SK Hynix, accounting for nearly half of the KOSPI's total market capitalization, to slump substantially last week. Both these stocks have also been tanking early last week over concerns about intensifying competition from China. Together, these factors led SK Hynix to tank more than 20% last week, while Samsung shares plunged nearly 18%, which ultimately culminated in the whole South Korean stock market suffering a severe market collapse.
In particular, foreign investors have been the primary sellers, offloading a net 176 trillion won worth of Samsung and SK Hynix shares this year, which represented 86% of total foreign net selling in the KOSPI main board, per data released by the Korea Exchange, as of Oct. 14., 2026.
Will This Last Long? The Long-Term Outlook
Despite the panic, South Korea's long-term fundamentals remain remarkably robust, suggesting this may be a painful but temporary correction rather than a structural breakdown.
The International Monetary Fund (“IMF”) recently raised its 2026 growth forecast for South Korea to 3.3%, a significant 0.7 percentage point upgrade from its July projection, citing strong semiconductor exports that are more than offsetting geopolitical headwinds. The IMF also estimates that South Korea's potential growth rate will rise for two consecutive years—to 2.14% this year and 2.20% next year—marking the first back-to-back increase in four decades (per data from the IMF’s October 2026 World Economic Outlook).
Valuations have also compressed to levels that historically signal a bottom. At the 5,000-point level for the KOSPI, the 12-month forward price-to-earnings ratio falls to just 4.1 times, with a price-to-book ratio of 1.1 times—lower than the troughs seen during previous volatility episodes in March and July of this year (per a recent report from Samsung Securities).
To this end, Samsung Securities notes that unless earnings forecasts deteriorate materially, the 5,000-point line should serve as support to boost performance of KOSPI in the days ahead.
Looking ahead, clear catalysts for a recovery in the South Korean stock market are on the horizon. Both Samsung and SK Hynix are scheduled to report third-quarter results later this month, which should provide clarity on chip demand and supply outlooks. Furthermore, the U.S. midterm elections in early November should reduce macro-political uncertainty, while the anticipated IPO of AI company Anthropic in mid-November could help stabilize broader AI market sentiment once the initial event volatility subsides.
Buying the Dip: The Case for South Korean ETFs
Considering this growth outlook for the South Korean stock market, one might reasonably conclude that buying the dip in South Korean equities now is a strategy to gain more in the future.
The combination of upgraded IMF growth forecasts, historically low valuations and identifiable near-term catalysts suggests that the current panic-driven selloff may be offering long-term investors a rare entry point into one of Asia's most dynamic economies.
With this thesis in mind, one may want to add the following South Korean ETFs to their portfolios to capitalize on the KOSPI’s long-term growth potential:
iShares MSCI South Korea ETF EWY
This fund, with net assets worth $21.64 billion, offers exposure to 77 South Korean equities. Samsung Electronics holds the first spot in this fund, with a 22.49% weight, while SK Hynix holds the second spot with a 21.51% weight.
EWY surged 54.7% year to date and charges 59 basis points (bps) in fees. It traded at a good volume of 20.39 million shares in the last trading session.
Franklin FTSE South Korea ETF FLKR
This fund, with net assets worth $1.62 billion, includes 144 South Korean stocks. Samsung Electronics holds the first spot in this fund, with a 17.76% weight, while SK Hynix has the second spot with a 17.27% weight.
FLKR soared 55.8% year to date and charges 9 bps in fees. It traded at a volume of 0.49 million shares in the last trading session.
Matthews Korea Active ETF MKOR
This fund, with net assets worth $123 million, includes stocks of companies located in South Korea. Samsung Electronics holds the first spot in this fund, with an 18.1% weight, while SK Hynix holds the fifth spot with a 3.7% weight.
MKOR surged 54% year to date and charges 79 bps in fees. It traded at a good volume of 45.66 million shares in the last trading session.
Direxion Daily MSCI South Korea Bull 3X ETF KORU
This fund, with a net asset value of $10.64 as of Oct. 16, 2026, seeks daily investment results of 300% of the performance of the MSCI Korea 25/50 Index. SK Hynix holds the first spot in this fund, with a 27.41% weight, while Samsung Electronics holds the second spot with a 23.38% weight.
KORU rose 17.2% year to date and charges 132 bps in fees. It traded at a good volume of 45.66 million shares in the last trading session.
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iShares MSCI South Korea ETF (EWY): ETF Research Reports
Franklin FTSE South Korea ETF (FLKR): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).