South Korean stocks entered technical oversold territory on July 13 after the KOSPI index fell 64.91 points to 7412.03, marking a decline of over 20% from its recent peak recorded last month, according to Samsung Securities. Analyst Yoo Seung-min attributed the drop to concerns over an artificial intelligence investment bubble rather than leveraged exchange-traded fund supply issues. The decline is considered unusual given that other stock markets remain relatively stable and global macroeconomic conditions are sound.
Samsung Securities Identifies AI Bubble Concerns as Core Driver
Samsung Securities analyst Yoo Seung-min stated that the core reason for the Korean stock market's weakness is concerns over an AI investment bubble, not leveraged ETFs or other supply factors. Yoo noted that the price-to-earnings ratio derating of tech-heavy stock markets including Korea and the United States has been ongoing since the beginning of the year, describing this as a typical phenomenon observed in the late stages of a bull market cycle. The analyst clarified that this derating reflects market caution regarding AI investment bubbles rather than fundamental deterioration, with the ultimate outcome depending on whether corporate earnings face adjustments.
Korean Semiconductor Exports Reach Record Highs as of July 10
Korean semiconductor exports recorded the highest growth rate ever as of July 10, according to customs data cited by Samsung Securities. Yoo Seung-min highlighted that export data from Korea serves as a fast-breaking macro indicator for global stock markets, with semiconductor export growth particularly important given concerns about the peak of AI investment. Based on the record export performance, the analyst concluded that the debate over an AI investment peak has not yet materialized into reality.
KOSPI Enters Technical Oversold Zone After 20% Decline
The KOSPI has fallen more than 20% from its peak recorded last month, marking the largest decline since September 2011 when the index dropped approximately 26% due to the U.S. credit rating downgrade and European fiscal crisis, excluding the 35% drop during the 2022 COVID-19 pandemic. Since the 2008 financial crisis, the KOSPI has declined 20% or more from its 52-week high on five occasions total. Yoo Seung-min stated that the recent plunge in Korean stocks is the result of forecast errors and overreaction, with the market having entered technical oversold territory. According to internal indicators measuring investor sentiment in the KOSPI market, the index has been repeating panic selling and panic buying since the end of last week, forming a typical support line. The analyst recommended maintaining a risk-on stance for global asset allocation strategy and using the short-term plunge in Korean stocks as an opportunity to increase exposure.
FAQ
What caused the KOSPI to enter oversold territory on July 13?
The KOSPI entered technical oversold territory on July 13 after falling 64.91 points to 7412.03, driven by concerns over an artificial intelligence investment bubble rather than leveraged ETF supply issues, according to Samsung Securities analyst Yoo Seung-min.
How did Korean semiconductor exports perform as of July 10?
Korean semiconductor exports recorded the highest growth rate ever as of July 10, according to customs data cited by Samsung Securities, indicating that concerns about the peak of AI investment have not yet materialized into reality.
How does the current KOSPI decline compare to historical drops?
The KOSPI's decline of over 20% from its recent peak is the largest since September 2011, when the index fell approximately 26% due to the U.S. credit rating downgrade and European fiscal crisis, excluding the 35% drop during the 2022 COVID-19 pandemic.
