A new generation of traders is trapped in Asia's market meltdown

Summary

From high-school clubs to social-media influencers, Asia's new stock traders face a brutal reality check.

Choi Jin-wook, a 35-year-old office worker in Seoul, bought $37,000 worth of shares in South Korean memory-chip giant SK Hynix in July, thinking prices had to bounce back from a summertime selloff. Instead, his holdings have halved in value as investors worry the artificial intelligence build-out will slow.

While Choi had grown accustomed to the wild volatility of South Korea's stock market this year, a plunge last week was still painful. Even so, he is hopeful that the world's second-largest memory-chip maker will eventually recover. "It feels like we've hit every possible bad news at this point," he said.

Asian stock markets have been on a stomach-churning ride this year. The AI build-out has fueled demand for chips and other technology made in Asia, and sent shares in SK Hynix, Samsung Electronics, Taiwan Semiconductor Manufacturing Co. and Japan's Kioxia Holdings soaring. Individual investors in South Korea, China, Japan and Taiwan piled in, hoping to make a quick fortune.

But now those gains are unraveling fast on worries that the U.S. data-center build-out could slow following the midterm elections. That is sending investors on yet another wild ride and officials are growing worried.

South Korea's benchmark Kospi index plunged nearly 12% last week, dragged down by Samsung Electronics and SK Hynix, which fell by about 16% and 20%, respectively. The index is down roughly 45% from its June peak.

Japan's benchmark Nikkei index has shed almost 20% since its June high, while the Nikkei Semiconductor Stock Index has fallen 54% over the same period. Shares in flash-memory maker Kioxia fell nearly 37% last week.

On Monday, the Kospi stayed roughly flat, while Taiwan's benchmark Taiex index recovered with a gain of roughly 5%, after authorities stepped in to curb market volatility.

Taiwan has mobilized the National Financial Stabilization Fund, which has around $15 billion at its disposal, to help stabilize the stock market. On Monday, the country's market regulator imposed curbs on short selling, helping boost TSMC shares. South Korea's Finance Ministry has temporarily loosened collateral rules for brokerage firms to stem excessive selling.

In South Korea, the rout is piling pressure on President Lee Jae Myung, who was one of the biggest cheerleaders of the country's stock-market boom. He warned last month that "a correction was inevitable," but opposition figures have criticized the government's policies as losses have mounted.

"The Lee government's reckless arrogance in thinking it could move the market has ultimately opened the gates of hell," said the mayor of Seoul, Oh Se-hoon, in a post on Facebook on Sunday.

Min Gyeong-gwon has lost faith in the government after experiencing two brutal stock-market crashes.

"It was the president who laid out a bright future for Korean stocks at the start of the year. People went in with confidence because we believed him," said Min, who heads an activist group representing local individual investors.

The stock-market gyrations are providing an early lesson to investors who are just cutting their teeth.

In Japan, Minami Kamiya, a 17-year-old, is part of her high school's investment club. One of their coaches, a prominent activist shareholder in Japan, contributes to a 200,000 yen starting stake for each student, or around $1,200, so that each can craft an investment portfolio.

But since the U.S. midterms, some of Kamiya's clubmates have been posting messages in their Slack channel after watching Kioxia fall. "There were people freaking out," she said. Kamiya instead stuck with stocks like food giant Nissin, which she picked partially due to her love of instant noodles.

The wild swings are extending beyond tech stocks. Rio Negishi, a 22-year-old student at Japan's Meiji University, hadn't put much money into tech stocks, but he has still seen his portfolio lose about $38,000, or around 30% of its value.

"Right now, the next step -- or rather, where to move the funds -- is quite unclear," he said. "I've sold off some of my holdings, but now I have no idea where to reinvest the capital."

This year, Lee Ka-young, a 25-year-old software developer in Seoul, had posted short videos on Instagram giving stock tips to mom-and-pop investors. But since the crash in the Kospi this summer, followers have begun to leave comments such as "Help us" and "What are we supposed to do?" Lee's average monthly views have fallen to a fifth of what they were this summer, and her own stockholdings are down 30% from the peak to about $6,000.

Still, Lee believes stocks remain a decent investment and feels a sense of solidarity with others stuck in losing positions.

"I thought this time would be different," she said. "But I'll keep investing, with the mindset of passing my shares down for generations."