South Korea's stock market has crashed after a US chip selloff spilled over, and it is very bad news for Korean retail investors who bought shares with borrowed money.

• Korea's main index fell more than 10% in a single day, one of the worst days in its history.
• The trigger came from the US, where chip stocks started falling as investors got nervous before Micron's earnings.
• Korean memory chip stocks fell much harder than their US counterparts.
• Because so many Koreans bought stocks on borrowed money, brokers demanded more cash and sold people out when they could not pay.
• Funds were dumping shares at the same time, so each forced sale pushed prices lower and triggered the next one.

Outlook: Until the forced selling works through and confidence in AI chip demand returns, Korean stocks stay fragile.