The Bank of Korea (BOK) submitted a report to parliament on May 29 stating that the domestic stock market will remain sensitive to external factors, but strong corporate fundamentals will limit downward pressure on stock prices. The assessment comes as the KOSPI index experienced sharp corrections following large-scale foreign investor selling and concerns over slowing AI investment. The BOK noted that despite recent volatility, the KOSPI's annual gain of 60.3% remains higher than major markets including Taiwan, Japan, the United States, and Europe.
KOSPI Posts 60.3% Annual Gain Amid Sector Concentration
The KOSPI rose sharply on expectations of capital market reforms and improved semiconductor earnings, then corrected significantly due to AI investment slowdown concerns and large-scale foreign net selling, according to the BOK report. The central bank stated that the annual gain of 60.3% still exceeds performance in Taiwan, Japan, the United States, and Europe. The BOK assessed that domestic investment demand concentrated in a small number of AI-related sectors, with stock price volatility expanding whenever major issues such as US big tech investment and fundraising or interest rate rises in major countries came into focus.
V-KOSPI Reaches Record High as Circuit Breakers Trigger 7 Times Since May
The volatility index V-KOSPI recorded a daily average of 85.3 during the month, surpassing the Nov 2008 level of 70.3 during the global financial crisis to reach the highest level on record, the BOK reported. The central bank pointed out that since May, large-scale foreign net selling concentrated alongside increased leverage investment, triggering circuit breakers 7 times and sidecars 41 times.
BOK Expects Corporate Fundamentals to Limit Stock Price Downside
The BOK stated that the stock market will react sensitively to external uncertainty factors including AI industry outlook, changes in major countries' monetary policy, and global capital flows. The central bank noted that while foreign investors' portfolio rebalancing-driven net selling continues, favorable fundamental conditions such as large operating profit forecasts for semiconductor companies are expected to limit downward pressure on domestic stock prices.
FAQ
What did the Bank of Korea report on May 29?
The Bank of Korea submitted a report to parliament on May 29 stating that the domestic stock market will remain sensitive to external factors, but strong corporate fundamentals will limit downward pressure on stock prices.
Why did the KOSPI experience sharp corrections recently?
The KOSPI corrected significantly due to concerns over slowing AI investment and large-scale foreign investor net selling, after earlier gains driven by capital market reforms and semiconductor earnings expectations.
How high did the V-KOSPI volatility index reach?
The V-KOSPI recorded a daily average of 85.3 during the month, surpassing the Nov 2008 level of 70.3 during the global financial crisis to reach the highest level on record.
