The South Korean stock market has plunged sharply, led by semiconductor shares, intensifying the “peak-cycle debate.” However, the Bank of Korea and securities industry experts have offered analysis suggesting this correction is unlikely to mark the start of a sustained downtrend. The massive sell-off by foreign investors is also seen more as portfolio rebalancing rather than a negative outlook on South Korea’s equity market.<\/p>\n
Appearing on the YouTube channel “Kim Jae-won TV,” which has 551,000 subscribers, on July 9, LS Securities Director Yeom Seung-hwan explained the backdrop of recent foreign selling. “Foreign investors are mostly foreign-based funds, and under fund rules, if a specific stock’s weighting within an account exceeds a certain threshold, they must reduce that position,” he said. “Just last year, Samsung Electronics (005930.KS) and SK Hynix (000660.KS) accounted for around 30% of South Korea’s total stock market, but that figure has now risen to 60%,” he added, likening it to “the same principle as the National Pension Service recently adjusting its domestic equity weighting.” The analysis suggests that as the market capitalization of the two stocks has swelled significantly, mechanical selling has followed to comply with fund mandates.<\/p>\n
On the same day, the Bank of Korea offered a similar assessment in a business report submitted to the National Assembly’s Finance and Economy Committee. The BOK stated that “the likelihood of a sustained downtrend in domestic stock prices is limited,” evaluating the recent sharp decline as the combined effect of foreign investors taking profits and end-of-half portfolio adjustments. The explanation is that volatility increased as investors rebalanced their holdings following a rapid short-term surge in stock prices.<\/p>\n
The BOK’s analysis diverges somewhat from recent warnings by global investment banks such as Goldman Sachs and Morgan Stanley, which have cautioned about the concentration in semiconductor stocks and elevated earnings expectations. Morgan Stanley suggested that funds concentrated in semiconductors could shift to hyperscalers and other sectors, while Goldman Sachs diagnosed that heightened expectations make it difficult for strong earnings alone to fuel a further rally.<\/p>\n
In response, the BOK cited the fact that semiconductor companies’ operating profit forecasts continue to be revised upward and that the government is also pursuing capital market reforms. In particular, it projected that the global semiconductor cycle will remain in an expansionary phase for a considerable period. The assessment is that as AI applications broaden, computing demand continues to grow, and major Big Tech companies will find it difficult to easily scale back infrastructure investments as they compete for leadership in the AI market.<\/p>\n
The high process complexity of advanced semiconductors, which makes it difficult to rapidly increase supply even as demand grows, was also cited as a factor supporting industry conditions. With semiconductor companies’ operating profit forecasts continuing to rise, the recent stock price decline is seen as unlikely to mark the beginning of a long-term downtrend.<\/p>\n
Director Yeom Seung-hwan expressed a similar view on the relationship between interest rates and the stock market. “Rising interest rates do not unconditionally cause the stock market to fall,” he emphasized. “Even if rates are high, the market can hold up if corporate earnings are growing.” He added, “U.S. companies did not cancel AI data center investments despite high interest rates, and as a result, semiconductor companies’ earnings improved. Rising rates become a negative factor when they impair corporate profits, but the stock market is holding up because earnings growth is currently strong enough to overcome high rates.”<\/p>\n
South Korea’s stock market has recently undergone a significant correction, led by semiconductor shares. Samsung Electronics and SK Hynix fell 6.92% and 6.06% respectively on July 7, followed by declines of 6.25% and 5.68% on July 8. The KOSPI also plunged 5.35% on July 8 alone, closing at 7,246.79. As semiconductor companies delivered solid earnings yet saw their stock prices fall, concerns have grown that the AI-driven semiconductor boom may have peaked.<\/p>\n
Both the BOK and Director Yeom noted that downside risk factors have not completely disappeared. The BOK identified failure to improve AI investment returns relative to costs, or a reduction in related investments by Big Tech companies, as downside risks. It forecast that domestic stock prices are likely to remain highly volatile going forward, influenced by AI industry concerns, major economies’ monetary policies, and shifts in global capital flows.<\/p>\n
Director Yeom pointed to single-stock leveraged ETFs as a reason why the KOSDAQ and small- to mid-cap stocks have been underperforming relative to the KOSPI. “Single-stock leveraged ETFs that track Samsung Electronics and SK Hynix at double leverage have significantly amplified the polarization,” he analyzed. “As investors sold KOSDAQ stocks to rotate into these products, supply and demand became concentrated on one side.”<\/p>\n
Regarding the market outlook, Yeom suggested a rebound is possible after a month or two of consolidation in July. “Because the market rose so much through June, a period of time-based correction and range-bound trading is inevitable in July,” he said. “Only after going through this breather can the KOSPI break through the 10,000-point level.” As an investment strategy, he advised, “If the KOSPI falls below 8,000, that’s a bottom and an opportunity. It’s good to accumulate high-quality AI and semiconductor-related companies in tranches to prepare for the second half.”<\/p>\n
Finally, he emphasized the importance of mental discipline in a highly volatile market. “Stock prices can fluctuate, but what matters is whether corporate value continues to trend upward,” Yeom said. “If you compare yourself to others, you end up making the mistake of selling good companies and chasing stocks that have already surged. The most important thing is to stick to your own investment principles and pace.”<\/p>\n","protected":false},"excerpt":{"rendered":"The South Korean stock market has plunged sharply, led by semiconductor shares, intensifying the “peak-cycle debate.” However, the…\n","protected":false},"author":2,"featured_media":80560,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[456],"tags":[5319,845,846,896,3166,335,8230,3535,276,275,29915],"class_list":["post-80559","post","type-post","status-publish","format-standard","has-post-thumbnail","category-bank-of-korea","tag-ai-semiconductors","tag-bank-of-korea","tag-bok","tag-foreign-investors","tag-goldman-sachs","tag-kospi","tag-ls-securities","tag-morgan-stanley","tag-samsung-electronics","tag-sk-hynix","tag-yeom-seung-hwan"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/80559","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=80559"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/80559\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/80560"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=80559"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=80559"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=80559"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}