The Korea Composite Stock Price Index has recently experienced dramatic swings between sharp drops and surges, with circuit breakers triggered on consecutive days. Given last month's significant losses, market participants are closely watching whether a recovery can materialize this month. Securities industry experts believe that ongoing market caution over rising interest rates makes a rapid V-shaped rebound unlikely, with a gradual uptick being the more probable scenario.
As of 3:08 p.m. local time on the 3rd, the Korea Composite Stock Price Index stood at 6,241.46 points, down 354.74 points, or 5.38%, from the previous trading day. Last Friday's single-day surge of over 17% sparked widespread attention on the current rally. Meanwhile, the KOSDAQ index rose 2.17% from the prior day, triggering a buy-side circuit breaker in early morning trading as the index spiked sharply.
Mirae Asset Securities believes the domestic Korean stock market is now nearing its bottom. The institution notes that the recent sharp decline in AI infrastructure-related stocks was not due to deteriorating corporate fundamentals but was caused by concentrated position liquidation. However, regarding the pace of stock price recovery, Mirae Asset Securities, referencing past recovery phases following major market declines, suggests this trajectory may resemble the market repair process during the 2022 Fed rate hike cycle. The institution states that in an environment where markets remain wary of rising interest rates, a rapid valuation increase is hard to expect, making a gradual recovery more likely than a quick V-shaped rebound.
Brokerages also judge that the additional selling pressure from foreign investors, who wield significant influence over the domestic Korean market, will be limited. Year-to-date, net foreign selling in the Korea Composite Stock Price Index has reached 160 trillion won, hitting an all-time high. Last month, the three-month rolling net foreign selling amounted to -1.8% of the average daily market capitalization, a level comparable to the 2020 COVID-19 crisis and the 2008-2009 global financial crisis. Based on this, Mirae Asset Securities predicts a mild recovery phase for the Korean stock market this month, driven by improved valuation appeal and the fact that corporate earnings have not been materially damaged.
Mirae Asset Securities analyst Ryu Myung-gan stated, "The global competition for AI infrastructure investment continues, and the logic for memory chip demand remains intact, so foreign selling momentum is likely to slow." Hyundai Motor Securities similarly judges that the Korea Composite Stock Price Index has now established a support level after this sharp correction. The short-term supply-demand imbalances from earlier concentrated capital inflows into domestic and international semiconductor sectors and leveraged fund increases have largely been cleared, significantly reducing downward pressure on the market.
Brokerages believe that while the Korea Composite Stock Price Index will likely begin a rebound this month after the major drop, it is unlikely to replicate the strong upward trends seen in May and June. However, as AI investment gains are gradually realized, with foreign capital returning to net buying, the index may trend upward in a slow, volatile manner. Hyundai Motor Securities analyst Kim Jae-seung commented, "After the adjustments in June and July, the previous market structure of excessive capital concentration has normalized, and conditions are now favorable for foreign investors to resume net buying. This month, the focus can be on stocks within the semiconductor sector that have fallen excessively and have room for recovery."
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