Last week, before the bombs started falling in Iran, I warned on the possibility of fireworks in South Korea, and I didn’t mean anything to do with Kim Jong-Un.

The KOSPI is (or was) the world’s standout performer among major equity benchmarks in 2026, having risen almost 50% in the first two months of the year.

Long story short, South Korean equities are a bubble and as I put it four sessions ago, “the near vertical inflection feels unstable, particularly given the vol backdrop.”

The “vertical inflection” bit was a reference to the KOSPI’s 25% gain since February 9, while the “vol backdrop” warning was a nod to the fact that implied volatility on the benchmark was the highest since the pandemic crash. “Spot up, vol up” conjunctures are notoriously dicey.

Fast forward four sessions, and the KOSPI crashed. This is a (rare) case when “crash” isn’t hyperbole. The index fell 12% in a singe day on Wednesday.

There’s the chart in all its bearish glory. Not even during the financial crisis did the benchmark suffer a one-day decline of this magnitude.

The drop triggered circuit breakers and trading halts. Just 1.3% of all traded names managed a gain on the session.

I’m going to be a little abrasive, so steel yourself. Bloomberg on Wednesday wrote that “few saw it coming.” That’s nonsense. Virtually everyone saw it coming. When stocks are running inexorably higher and vol’s not just elevated, but simultaneously sky-high, you can expect a gravity moment.

This rally was a function of leveraged bets on the AI story. Consider this: SK Hynix was up fivefold in less than a year. (With Wednesday’s record drop, it’s down 22% in three days.)

The figure above, from BofA’s Michael Hartnett, gives you some context. With the exception of Bitcoin (plotted on a separate axis), there’s no pandemic-era precedent for how far the KOSPI overshot versus its 200-day.

Now consider that South Korea’s benchmark fell 7% on Tuesday, the first chance local shares had to react to the war (South Korean markets were closed for a holiday on Monday).

What happens when a highly leveraged momentum trade abruptly moves against the leveraged bets? Margin calls and stop-outs. Once that process starts, it snowballs. Damn near everybody’s a forced seller.

The local fear gauge I mentioned last week spiked to the highest since 2008 mid-week. The two-session decline on the KOSPI exceeded 18%.

There’s some risk of a self-fulfilling prophecy here beyond the margin calls. In the week to Tuesday, the won fell something like 4%, and South Korea’s heavily (heavily) reliant on imported energy.

Suffice to say soaring oil prices are an issue, and if foreigners are forced to liquidate their local equity holdings, that could pressure the currency further, and so on, notwithstanding the notion that the won’s a commodity currency in its own right these days. The commodity: Memory chips.

In any case, this wasn’t hard to see coming. I told you it was coming last week, and that hardly made me a seer. KOSPI bubble warnings were a fixture of my inbox by the time I finally got around to parroting them, I was just lucky enough that my belated injunction happened to mark the exact top.

But if Bloomberg’s right to say that by and large, “few saw it coming,” that means “most are heedless.”