South Korea’s benchmark Kospi index has tumbled nearly 40% from its record high in just over a month, shattering the optimistic “10,000 Kospi” narrative and forcing analysts to sharply lower their expectations as investors search for signs of a market bottom.
The Kospi closed at 5,663.24 on July 29, down 5.98%, or 360.57 points, from the previous session, according to the Korea Exchange. The index has fallen 39.7% from its intraday record of 9,385.59 reached on June 19.
The market’s decline has erased roughly $2.0 trillion in market value. The Kospi’s total market capitalization shrank from a record about $5.4 trillion on June 22 to about $3.4 trillion on July 29, a loss of approximately $2.0 trillion in just over one month.
The selloff has been fueled by heavy foreign investor selling, the unwinding of leveraged retail positions and weakening investor sentiment following the rapid rise of Chinese artificial intelligence and semiconductor companies. Analysts said enthusiasm surrounding the successful initial public offering of Chinese memory-chip maker CXMT, along with growing concerns over China’s expanding semiconductor capabilities, has weighed heavily on South Korean chipmakers and challenged the long-standing AI growth narrative.
Until recently, Wall Street and domestic brokerages had expected the Kospi to stabilize well above current levels.
Goldman Sachs had identified 6,800 as the market’s first key support level, followed by 6,500 and then a range between 6,000 and 6,100 if selling intensified. Morgan Stanley projected a trading range of 6,000 to 9,000, while many South Korean brokerages also viewed the 6,000 level as a likely floor.
With the index falling decisively below that threshold, analysts are revising their forecasts and reassessing where the market could ultimately bottom.
Kim Yong-gu, an analyst at Yuanta Securities, said the Kospi could fall as low as 5,150 in a worst-case scenario during August.
Kim said the market appears capable of establishing a long-term bottom within a drawdown range of 35% to 40% from its recent peak, equivalent to roughly 5,900 to 5,500 on the index.
“Unless markets face a crisis comparable to the 2020 pandemic, the 2008 global financial crisis, the 2000 dot-com crash or the 1998 Asian financial crisis, the area around 5,500 is likely to represent the long-term bottom,” Kim said.
Despite identifying 5,150 as the worst-case level, Kim argued that investors should consider accumulating quality stocks rather than panic selling if the index remains around 6,000.
Noh Dong-gil, an analyst at Shinhan Securities, said investors should determine whether the recent decline represents only a valuation correction or signals a more fundamental deterioration in corporate earnings.
“During the rally, stock prices and earnings increased together,” Noh said. “During the decline, however, valuations deteriorated before earnings expectations weakened.”
He said foreign investors’ selling in both cash equities and futures, combined with the unwinding of leveraged retail positions, accelerated the decline, while investors simultaneously reassessed the durability of AI- and semiconductor-related earnings.
Even after the recent selloff, Noh argued that valuations appear historically inexpensive. The Kospi is trading at a price-to-earnings ratio of 5.1 times, roughly 60% of its interest-rate-adjusted fair multiple of 8.5 times and the lowest level since 2009.
“To justify another leg lower, investors would need fresh evidence that 2027 earnings expectations are deteriorating, rather than simply assigning lower valuation multiples,” he said.
Technical analysts also view the 5,500 level as a key area of support.
Kim Sung-no of BNK Securities said the Kospi had completed a double-top pattern formed between May and July and had already reached its initial downside target of 5,400 to 5,500.
“Although the correction has unfolded more quickly than in previous market cycles, we believe the technical adjustment has largely run its course,” Kim said.
Kang Hyun-ki of DB Securities said the emergence of Chinese AI and semiconductor companies has weakened the market’s previous AI-driven growth narrative, increasing the likelihood that the Kospi will trade sideways for an extended period.
“In a range-bound market, buying near the lower end of the trading range and selling near the upper end is likely to be more effective than simply following momentum,” Kang said.
