Major Wall Street banks are signaling that South Korean equities may be near a floor after the Kospi dropped more than 30% from its June 22 record high.
In a Monday research note, Citigroup described the latest selloff as a “technical correction” rather than a sign of weakening fundamentals. The bank kept its 10,000 target for the Kospi, which implies upside of more than 50% from Monday’s close. Citi said South Korea’s economic fundamentals remain solid, the broader policy setting is still supportive, and much of the market’s main resistance has already been cleared, leaving current levels attractive for allocation.
Morgan Stanley also maintained its 9,000 target. The bank said several indicators show the Kospi is moving closer to a bottom, with forward valuations for the benchmark and chip stocks nearing historical lows. At the same time, it lowered its bear-case target to 6,000 on slower earnings growth and set a 6,000-9,000 expected trading range for the next three to six months.
Both banks advised investors to balance participation in any rebound with defensive positioning. Morgan Stanley said it continues to favor a “barbell” approach that combines major technology names with defensive sectors.
According to Bitget market data, the Kospi rebounded about 4% on the day. Samsung Electronics gained nearly 7%, while SK Hynix rose about 5%, leading the recovery.
The trigger for the sharp selloff came from three overlapping factors: concern over the outlook for AI spending, the index’s heavy concentration in a handful of heavyweight stocks, and large-scale leveraged speculation by retail traders.
Retail investors have taken particularly heavy losses. Since the listing of single-stock leveraged ETFs on May 27, retail net buying has reached 14 trillion won, or about $9.4 billion, far above roughly 2 trillion won in net buying by foreign investors. As shares of Samsung Electronics and SK Hynix retreated sharply, those leveraged positions came under severe pressure.
Macro conditions added to the strain. The Bank of Korea raised rates by 25 basis points to 2.75% last Thursday, marking its first rate hike since January 2023. The central bank also said inflation would remain above its 2% target for “a considerable period of time.”
Morgan Stanley also warned that uncertainty around AI spending trends, the pace of capital expenditure by hyperscale cloud providers, and semiconductor supply dynamics could keep market volatility elevated.