The trend is no longer your friend as the Kospi momentum trade unwinds
- The Kospi momentum trade is no longer correcting gently. It is unwinding through leverage.
- Foreign selling left Korean equities increasingly dependent on retail investors and leveraged ETFs.
- SK Hynix-linked products can turn falling prices into forced selling as daily exposure is rebalanced.
- Higher oil, a firmer USD and rising volatility leave Asian technology markets vulnerable to another leg lower.
The trend is no longer your friend
If you are long the Kospi, the trend is no longer your friend. Mercifully, the South Korean market is shut today, but the setup still looks heavy enough for the index to circle the drain a little further when trading resumes next week.
Bloomberg Markets Live reporter and strategist David Savage makes the central point plainly: the momentum trade that powered Asian equities through the first half of 2026 is now beginning to work in reverse.
Momentum was the dominant factor trade across global markets this year, but nowhere was it more concentrated than in Asia. South Korea and Taiwan became the cleanest regional expressions of the AI boom, pulling in global benchmark money, domestic retail flows and an increasingly aggressive layer of leveraged exposure.
That worked while prices were rising.
Now investors are taking profits from the first-half winners and moving toward areas that were left behind. The reversal is also showing up in US semiconductors, where the Philadelphia Semiconductor Index has fallen more than 18% from its June highs.
This is not necessarily the end of the AI story. It is the market deciding that too much of that story was priced too quickly...
Author
Stephen Innes
SPI Asset Management
With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.
