A complete review of South Korea’s five major stock market crises in history + emergency F4 consultations + rescue measures + subsequent market performance
This F4 four-party emergency meeting in South Korea (the Ministry of Finance, the Bank of Korea, the Financial Services Commission, and the Financial Supervisory Service) is the highest-level emergency mechanism South Korea uses to respond to a stock market crash and foreign-exchange turmoil. It comes with two core tools: the stabilization fund directly entering the market to support it, and tighter trading rules (leverage/short selling/margin). Below is a full breakdown in chronological order from the distant past to the present:
I. 1990: A burst in the South Korean stock market bubble (the first round of large-scale F4 + stabilization fund rescue)
1. Crisis background
In 1989, South Korea’s stock market bull run hits a high; the KOSPI surges to 1,015 points. In 1990, economic overheating bursts the bubble—within half a year the index plummets 32%; the market panics and sells; foreign capital withdraws collectively.
2、Authorities take measures
1. Urgently convene an F4 joint meeting and confirm a two-track stabilization fund方案:
- May 1990: Banks, securities firms, and insurers jointly contributed KRW 4 trillion to establish a stock-market stabilization fund that directly bought blue-chip stocks to support the market;
- In September 1990, an additional KRW 2.6 trillion was injected into the stock-price protection fund; a second round of escalation;
2. Rate cuts by the central bank release market liquidity, relax restrictions on foreign ownership, and attract overseas capital to return.
3、After the meeting, market performance
- Short term: after policy implementation, the market rebounds 16.8% within one month; panic sentiment rapidly eases, and the crash stops immediately;
- Medium term: the rebound lasts only about one month; since the underlying deterioration in fundamentals is not resolved, the market shakes and turns lower again, with the overall depth of drawdown continuing to exceed 40%;
- Long term: it continues to grind through range-bound weakness until August 1992 before it truly bottoms. In 1993, the stabilization fund exits smoothly, and the index then enters a long-term upward channel.
Second, 2003: the nationwide South Korean credit card crisis transmits to the stock market
1. Crisis background
Credit cards are issued indiscriminately nationwide, bad debts fully explode, and 3 million people become credit-impaired. Consumption collapses; corporate earnings plunge. The KOSPI falls 45% from the 940 peak, dropping as low as 500.
2、Core measures from F4 consultations
1. F4 holds emergency consultations for multiple consecutive days and sets up a KRW 400 billion专项 stock-market stabilization fund;
2. Tighten consumer-finance regulation comprehensively, cut off the transmission of the debt crisis to the capital markets; the central bank keeps cutting rates and relaxes corporate financing thresholds;
3. Limit malicious short-selling inside the market and raise margin requirements for derivatives trading.
3. Post-action market performance (the best round of rescue historically in Korea)
- Short term: the crash ends immediately, and panic positions are quickly cleared;
- Full year: from policy implementation to year-end, the KOSPI rebounds 37.4% for the whole year;
- Medium to long term: debt risks are gradually resolved, and the stock market enters a 3-year sustained slow bull run. This is one of the highest-success cases of South Korea’s regulatory interventions in markets.
Third, 2008: the global financial crisis; South Korean stocks nearly halved
1. Crisis background
The global subprime crisis breaks out. South Korea is highly dependent on exports plus foreign capital, and foreign capital flees wildly. The KOSPI crashes nearly 50% in the first half from May to November, triggering multiple market-wide trading halts; the Korean won collapses in parallel.
2、The full set of F4 measures to stabilize the market
1. F4 holds an emergency meeting overnight with high frequency; establishes a KRW 515 billion stabilization fund; and steadily stabilizes entry into the market through phased buying by month;
2. Six rounds of rate cuts by the central bank; the benchmark interest rate drops sharply from 5.25% to 2%;
3. Fully restrict short-selling mechanisms, raise margin requirements for futures and options, and ban naked short-selling; inject unlimited USD liquidity into financial institutions to stabilize the exchange rate.
3、Market performance after the meeting
1. Short term: a waterfall-like crash is immediately contained, and panic stampedes come to a complete stop;
2. Medium term: bottoming out by end-2008, a one-way rally throughout 2009; the KOSPI surged 53.19% for the full year;
3. Foreign capital returns; semiconductor and manufacturing bellwethers quickly restore valuations; the crisis is fully resolved.
Fourth, 2020: the global market crash caused by the COVID-19 pandemic
1. Crisis background
As COVID-19 spreads globally, the global markets trigger a wave of trading halts; South Korea’s KOSPI plunges 35% in the short term. The industrial chain shuts down, and foreign capital escapes on a large scale.
2. F4 measures
1. The F4 launches the highest-level emergency meeting and again activates the stock-market stabilization fund;
2. The central bank urgently cuts rates + conducts unlimited quantitative easing; comprehensively restricts short-selling and extends the short-selling cooling-off period;
3. The National Pension Service (South Korea’s largest pension fund) commits to continuously net buy domestic stocks against the trend.
3. Market outcome
The V-shaped reversal happens extremely fast; within three months, it fully recovers all losses. Combined with global liquidity injections, over the next two years, the South Korean stock market delivers a wave of super structural bull market—semiconductors and tech stocks surge violently.
Fifth, in 2022: the Fed’s aggressive rate hikes + a global recession-crisis
1. Background
The U.S. aggressively hikes rates, the Korean won depreciates sharply, and foreign investors continue selling South Korean stocks. The KOSPI falls 25% for the full year, and tech-weighted stocks undergo deep corrections.
2、F4 meeting measures
1. F4 holds multiple rounds of intensive talks, and once again restarts the stock-market stabilization fund;
2. Restrict short-selling transactions and tighten leverage in derivatives; the central bank passively hikes rates to protect the Korean won’s exchange rate;
3. Guide the National Pension Service and domestic institutions to increase allocations to domestic equities.
#3, Post-action market performance
The pace of the decline slows dramatically—from a free-fall to a choppy, drifting slide. After policy implementation in October 2022, the market gradually bottoms out. In 2023, as global liquidity loosening begins, a strong rebound cycle starts.
Sixth, latest: the July 2026 leveraged ETF collapse in this round (the one you’re currently focused on)
1. Core background
In May, South Korea allows a single stock to have a 2x leveraged ETF (Samsung and SK Hynix-only). When the decline triggers the programmatic centralized liquidation, it creates a negative-feedback stampede. The index triggers trading halts for two consecutive days, with the maximum drawdown of the 40-day period approaching 40%, and 360,000 retail investor accounts are forced to be liquidated.
2. Measures from the two rounds of emergency consultations on 7/16 and 7/29 for F4
1. July 16, the first round of F4: initially raise the margin requirement for leveraged ETFs to KRW 10 million; suspend approvals for new leveraged ETFs of the same type; strengthen investor education;
2. July 29, the second round of major F4 measures (latest):
- Raise the margin threshold in advance to cash of KRW 30 million by July 31, and stock assets are not counted toward margin;
- Limit the amount that retail investors can put into leveraged ETFs to no more than 20% of their total personal financial assets;
- Increase fees for excessive high-frequency trading; require simulated trading and exam entry for leveraged products; monitor the market 24 hours a day, all day long;
- Do not activate the stabilization fund to buy directly for the moment; instead, prioritize cutting the leverage-based cascade via trading rules. Backup plan: if the market keeps crashing, immediately activate the stabilization fund to support the market.
Reference for similar historical measures: South Korea had never previously imposed broad restrictions on single-stock leveraged ETFs; this is the first time in South Korea’s capital-market history that there has been strong, systematic supervision specifically targeting leveraged products tied to a single stock.
Seventh, unified summary: the patterns of South Korea’s F4 market rescue + the common patterns of post-action outcomes
1. Two fixed sequences for the rescue
Step one: First hold an F4 meeting and tighten trading rules (short-selling, leverage, margins);
Step two: If the rules prove ineffective, immediately launch the stock-market stabilization fund to directly step in and buy;
2. The short-term effect is almost 100% consistent
On the day the F4 emergency meeting takes effect / the next day, an extreme crash will certainly stop immediately; the negative feedback loop from panic selling is interrupted, and a rebound is likely after the bad news is digested;
3. In the medium to long term, there are two possible outcomes
- If the root cause of the crash is an external shock (the pandemic, the global financial crisis): the policy is followed by a rapid V-shaped reversal, with an extremely strong rebound;
- If the root cause is an internal market institutional loophole (for example, the 2026 leveraged ETF bubble): after the initial stop to the fall in the short term, the market enters a long period of range-bound grinding and bottoming; it’s hard to make new highs immediately and will require a long time to digest the leveraged sell pressure;
4. The true role of the stabilization fund
South Korea’s stabilization fund is mainly used to stabilize sentiment and block panic selling; it is hard to reverse the major trend in fundamentals. 1990 is a typical example: it stops the crash, but the downward trend in fundamentals remains unchanged, and the market continues to grind through a long period of bottoming.#GLW #SNDK #SOXL #KORU