Policy Chief Kim Yong-beom gives a preliminary briefing on the U.S. and South American tour at the Blue House Chunchugwan press center on the 22nd. [Blue House Photo Press Corps] 

Kim Yong-beom, the Blue House Policy Chief, stated on the 29th (local time) regarding the instability of the domestic stock market, including its sharp decline the previous day, that "the Financial Services Commission and the Financial Supervisory Service plan to examine the structural factors that make (the Korean stock market's) volatility particularly pronounced."

Chief Kim, who is accompanying President Lee Jae-myung on his state visit to Brazil, met with reporters at the local press center in São Paulo and remarked, "We need to examine the overall situation, not just leveraged ETFs."

Chief Kim first assessed that "the significant volatility observed over the past two to three months was not unique to our market."

He explained, "It is being influenced by the ongoing debate surrounding the future trajectory of semiconductor and AI stocks," adding, "There is also some skepticism regarding whether investment costs will actually translate into profits, regardless of AI's performance."

In addition, he analyzed that external factors, such as the successful IPO of China's largest DRAM manufacturer, ChangXin Memory Technologies (CXMT), on the Shanghai Stock Exchange and the development of deep ultraviolet (DUV) lithography equipment by Chinese state-owned enterprises, could also be contributing factors.

Chief Kim explained that it shows a similar pattern to the previous "DeepSeek shock," noting, "With CXMT achieving success, questions arise about whether the memory competitiveness gap with Korea's two industry leaders (Samsung Electronics and SK Hynix) remains secure."

However, Chief Kim acknowledged that even when considering these global trends and variables originating from China, it is a fact that the Korean stock market exhibits particularly noticeable volatility.

Chief Kim stated, "If there is a change of about 10 at the epicenter of the fluctuation, it appears as 20 to 30 in our country. This indicates that there are aspects being amplified due to the characteristics of our market."

He explained, "While this phenomenon might appear more pronounced due to leveraged ETFs, that is not necessarily the only reason," adding, "It is time to seriously examine the high proportion of derivatives and the composition of investors in our country."

Chief Kim emphasized the need for a precise analysis of the causes, stating, "Even if the debate surrounding semiconductors and AI concludes this time, similar issues could arise several more times. If we become the market with the highest volatility in the world every time that happens, it will be quite concerning for investors."

On the other hand, he added, "I believe that actual AI demand will remain robust," and noted, "I also took it as a message that we need to be more proactive in our investments and focus more intently on research and development (R&D), including at our two major memory companies, in light of the rapid advances made by China (such as CXMT)."