The KOSPI, which has retreated to the 5,500 level, could fall further to the low 5,100s, according to a brokerage forecast. The analysis calls for staggered buying down to the 5,150 level, on the assumption that the index may decline further.
AI Doubts Compound Foreign Selling
Kim Dae-joon, an analyst at Korea Investment & Securities, said in a report titled "Mechanical Staggered Buying and Risk Management" on the 19th that "the Korean stock market has been shaken by external shocks and continues to underperform."
He added that "cracks have begun to appear in AI optimism amid a prolonged period of high interest rates, and doubts have emerged over whether debt-funded investments by AI companies can actually generate cash."
The KOSPI's sensitivity to U.S. semiconductor stocks was also cited as a factor amplifying downward pressure. "The KOSPI has a 52-week rolling correlation coefficient of 0.6 with the Philadelphia Semiconductor Index on a weekly basis, a correlation high enough that it could not avoid this shock," Kim said. "Its heavy weighting in tech meant the KOSPI's decline was also steeper."
Still, he assessed that South Korea's credit risk has not risen sharply. With the country's credit default swap (CDS) premium holding steady in the 20 basis point range, he judged that the situation has not spread into a crisis across the financial system.
Staggered Buying Down to 5,150, With Eyes on Meta Earnings
He also forecast that even if oversold signals emerge, an immediate rebound is unlikely.
"Foreign investors, who drive supply and demand in the stock market, are selling IT — semiconductors, home appliances and hardware — and financial stocks including insurers and banks, sectors that carry heavy weightings in KOSPI market capitalization, and withdrawing liquidity," Kim said. "There are also no macroeconomic catalysts to drive a market rebound."
He advised investors to build a buying strategy that leaves open the possibility of further declines.
"With liquidity supply blocked and AI infrastructure risk unresolved, betting on price alone leaves investors fully exposed to rising market volatility," Kim said. "Rather, the right approach now is to leave the downside open on the premise that the index could fall further."
Kim said investors "should calculate investment intervals thoroughly down to 5,150 and approach the market through mechanical staggered buying," and urged "risk management ahead of Meta's earnings on the 21st."
He pointed to the period after Meta's earnings release as the time for aggressive bargain hunting. "The time to carry out aggressive bargain hunting will come after Meta's earnings announcement," Kim said. "If Meta demonstrates solid results and presents clear return-on-investment guidance justifying its AI capital expenditure, confidence that AI growth is achievable could be restored."
He added that "now is the time to watch for an event that could turn investor sentiment around," and that "until that is confirmed, risk management is required."