KOSPI opened at 6553.88 on the 21st, up 37.61 points (0.58%) from the previous trading day, after closing at 6516.27 the day before with a sharp decline of 304.33 points (4.46%). The Korean stock index has dropped approximately 2900 points in one month from its intraday high of 9385.59 recorded on the 19th of last month, following two major declines including a 6.37% drop on the 16th. Securities firms attribute the correction to a combination of weakened expectations for the AI industry, valuation adjustments, and liquidity shocks from leverage liquidation, rather than deteriorating corporate earnings. The KOSPI's 12-month forward price-to-earnings ratio has fallen below 6x, reaching a level lower than the 2008 global financial crisis low of 6.27x and marking the first time since the 2004 credit card crisis that the ratio has dropped below 6x.
KOSPI Valuation Falls Below 2008 Financial Crisis Levels
According to the Korea Exchange on the 21st, KOSPI closed at 6516.27 the previous day, down 304.33 points (4.46%). Following the 6.37% decline on the 16th, the index has fallen approximately 2900 points in one month from its intraday high of 9385.59 on the 19th of last month. The sharp drop pushed the KOSPI's 12-month forward price-to-earnings ratio below 6x, lower than the 6.27x recorded during the 2008 global financial crisis and marking the first time the ratio has fallen below 6x since the 2004 credit card crisis.
Analysts Forecast Box-Range Movement Through Year-End
Securities firms place greater weight on the possibility that KOSPI will continue a box-range pattern rather than a V-shaped recovery in the near term. Kim Jun-young, researcher at iM Securities, stated that "short gamma resulting from leverage product expansion plays a role in increasing market volatility rather than directionality," adding that "volatility can expand further in situations where credit balances are accumulated." Kim noted that "while the upper end of the previously expected KOSPI box range has lowered, the medium- to long-term path has not changed," forecasting that "a process to confirm the sustainability of the semiconductor cycle is necessary, so a market exploring direction within a box range is likely to continue through year-end."
Jo Jun-ki, researcher at SK Securities, commented that "while valuation attractiveness has increased due to excessive decline, investor sentiment is still not favorable." Han Ji-young, researcher at Kiwoom Securities, advised that "for the time being, it is necessary to focus on the semiconductor industry outlook and corporate earnings rather than leverage issues."
Big Tech Earnings This Week Seen as Market Turning Point
Securities firms identify this week's big tech earnings announcements as a variable that could break the negative cycle. They view the earnings of major companies including Alphabet and Intel as factors that will determine market confidence regarding the continuation of AI investment and the semiconductor industry outlook.
Jo Jun-ki stated that "this week's big tech earnings will be a watershed for the market." Han Ji-young noted that "the earnings season for AI companies will serve as an opportunity to confirm the sustainability of AI demand and whether semiconductor stocks can escape the deleveraging and de-rating phase."
FAQ
What caused KOSPI stocks to decline sharply in recent trading days?
According to securities firms, the recent correction resulted from a combination of weakened expectations for the AI industry, valuation adjustments, and liquidity shocks from leverage liquidation, rather than deteriorating corporate earnings. The index dropped 304.33 points (4.46%) on the 20th and 6.37% on the 16th.
How low has KOSPI valuation fallen compared to historical levels?
The KOSPI's 12-month forward price-to-earnings ratio has fallen below 6x, which is lower than the 6.27x recorded during the 2008 global financial crisis. This marks the first time the ratio has dropped below 6x since the 2004 credit card crisis.
What do analysts expect for KOSPI stocks through year-end?
Securities firms forecast that KOSPI will likely continue a box-range pattern through year-end rather than a V-shaped recovery. Analysts state that a process to confirm the sustainability of the semiconductor cycle is necessary before a clear rebound can be expected, with this week's big tech earnings seen as a key turning point for market sentiment.
