TLDR
- The KOSPI rose 4% on Tuesday after falling 9% last week and over 30% from its June peak
- Samsung Electronics surged nearly 7% and SK Hynix gained 5% leading the recovery
- Morgan Stanley maintains a 9,000 KOSPI target with a bear-case floor of 6,000
- The Kospi and Nasdaq-100 are moving almost in lockstep with a correlation of 0.95
- South Korean regulators have paused approvals for new leveraged single-stock ETFs
South Korea’s KOSPI bounced back sharply on Tuesday, rising around 4% as chipmakers Samsung Electronics and SK Hynix recovered from a brutal stretch of selling. The rebound came after the index dropped 9% last week and had fallen more than 30% from its peak in June.
Samsung shares jumped nearly 7% on Tuesday. SK Hynix climbed 5%. Both stocks had been hit hard by concerns that valuations tied to artificial intelligence spending had stretched too far.
The selloff last week was part of a wider global technology downturn. It hit AI-linked chip stocks even after Taiwan Semiconductor Manufacturing posted strong earnings, as investors questioned whether high valuations could hold.
Morgan Stanley weighed in, saying the correction looks deep but does not yet look like a full bear market. The bank said chipmakers made up around 70% of the KOSPI’s market cap decline since the start of the second half of the year.
The bank kept its 12-month KOSPI target at 9,000 but trimmed its bear-case forecast to 6,000, pointing to slower earnings growth. It described 6,000 to 9,000 as the likely trading range over the next three to six months.
South Korea as a Gauge for the AI Trade
South Korea’s stock market has quietly become one of the world’s most watched indicators for the global AI trade. The country’s heavy concentration of semiconductor stocks has made it sensitive to any shift in AI spending sentiment.
Analysts at Evercore ISI noted that the correlation between the Kospi and the Nasdaq-100 has reached 0.95, meaning the two indexes have been moving almost in sync. They described South Korea as the “tail that wags the dog” of global asset markets.
Michelle Gibley at the Schwab Center for Financial Research called the market “effectively a barometer for the AI trade,” citing memory chips’ central role in AI supply chains and growing leverage among retail investors.
Leverage Is Amplifying the Swings
Retail investors in South Korea have poured money into leveraged single-stock ETFs, particularly those tied to Samsung and SK Hynix. That has amplified the moves in both directions, contributing to the Kospi triggering its circuit breaker seven times this year.
The volatility got serious enough that South Korean regulators paused approvals for new leveraged single-stock ETFs to cool speculative activity.
Despite the recent pain, the Kospi is still up 113% over the past year and around 60% year to date. Morgan Stanley said forward valuations for the index and its chipmakers are near historical lows, though uncertainty around AI spending and supply dynamics could keep volatility elevated.
The bank continues to favor a strategy that balances technology leaders with more defensive holdings.
Stop guessing and start investing with confidence. KnockoutStocks gives you the AI insights, market intelligence, and stock research you need to spot opportunities, cut through the noise, and make smarter investment decisions — all in one powerful platform.
Sign up today and get 50% OFF full access to our premium stock picks.
Simply use coupon code SPECIAL50 at checkout to claim your exclusive discount.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
