Shares of the Southern KOSPI (03121) ETF dropped more than 5% during intraday trading, marking a fresh bout of volatility linked to Seoul's aggressive deleveraging cycle. The ETF was last seen trading at HK$5.77, down 4.86%, with total turnover reaching HK$67.29 million.
The turbulence comes as South Korea's benchmark equity gauge, the Korea Composite Stock Price Index (KOSPI), has suffered a maximum drawdown of approximately 40% from its June 19 peak of 9,385 points, triggering multiple circuit breaker halts along the way. Since the start of July, the combined market capitalization of KOSPI-listed stocks has evaporated by more than 2,116 trillion Korean won, a figure that nearly equals the country's entire gross domestic product for last year.
Despite the crushing sell-off, Morgan Stanley has lifted its rating on South Korean equities to "overweight." The investment bank forecasts the KOSPI will oscillate wildly within a short-term range of 5,500 to 10,500 points, driven by sharp swings in sentiment. Morgan Stanley believes that mega-cap bellwethers Samsung Electronics and SK Hynix, which together account for roughly 50% of the index's weighting, will provide significant valuation support for the overall market. The firm also expects that stocks in South Korea's industrial, defense, and financial sub-sectors will benefit from a favorable tailwind moving forward.
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