Hana Securities analyst Lee Kyung-soo issued a report on the 22nd comparing the current KOSPI market situation to historical shock events, identifying foreign investor buying patterns as the key variable for a potential rebound. The KOSPI fell approximately 25% from its peak of 9,052 on the 19th of the previous month to the 6,800 level. The analysis suggests the current phase more closely resembles the recovery periods following the 2004 China shock and 2009 Dubai shock rather than the 2002 IT bubble collapse, based on continued foreign buying activity. Lee stated that monitoring won-dollar exchange rate stability alongside foreign investor flows would be an appropriate strategy for the near term.
Hana Securities Compares KOSPI Stocks Decline to Four Historical Market Shocks
Hana Securities identified four historical cases where the KOSPI rose over 20% in the preceding year before declining 25% from its peak: the 2002 IT bubble first and second corrections, the 2004 China shock, and the 2009 Dubai shock. The subsequent market trajectories diverged based on foreign investor behavior. One year after reaching the 25% decline point, KOSPI returns during the IT bubble first and second corrections were -24.4% and -13.0% respectively. In contrast, returns following the China shock and Dubai shock were 16.5% and 26.6% respectively.
Foreign Investors Show Buying Pattern Unlike IT Bubble Period
During the IT bubble period, foreign investors continued selling even as stock prices declined, amplifying the downturn. During the China shock and Dubai shock periods, foreign investors purchased stocks for rebalancing purposes while individual investors sold holdings once prices recovered to their purchase levels, leading to index recovery. Lee stated that the continuation of recent foreign buying activity serves as core evidence for viewing the current phase as closer to the China shock and Dubai shock cases rather than the IT bubble. Lee explained that if foreign buying persists, investors could consider bottom-fishing with expected returns of 15-25% over the next year.
Won-Dollar Exchange Rate and Margin Trading Trends Signal Market Stabilization
Lee noted that assessing the sustainability of foreign buying requires monitoring won-dollar exchange rate stability, as renewed currency volatility could alter foreign capital flows. Market volatility factors have shown signs of easing. Credit balance and stock lending balance shifted to an increasing direction on the 21st, suggesting forced liquidations have concluded. Since mid-month, net creation amounts for Samsung Electronics (005930) and SK Hynix (000660) single-stock leveraged ETFs have been declining. Reduced inflows to leveraged ETFs lower tracking trade pressure generated during fund operations.
US Big Tech Earnings Forecasts Continue Rising
The analysis dismissed concerns that semiconductor demand has peaked. Earnings and capital expenditure (CAPEX) forecasts for US big tech companies are rising together for this year and next year, and software company earnings outlooks continue improving. The report concluded it is premature to view artificial intelligence (AI) investment and semiconductor demand as having reached a peak.
FAQ
What historical events does Hana Securities compare the current KOSPI situation to?
Hana Securities compared the current KOSPI decline to four historical cases: the 2002 IT bubble first and second corrections, the 2004 China shock, and the 2009 Dubai shock. The analysis indicates the current phase more closely resembles the China shock and Dubai shock recovery periods based on foreign investor buying patterns.
What were the KOSPI returns one year after previous 25% declines?
One year after reaching the 25% decline point, KOSPI returns during the IT bubble first and second corrections were -24.4% and -13.0% respectively. Returns following the China shock and Dubai shock were 16.5% and 26.6% respectively, with the difference attributed to foreign investor behavior during each period.
