Seven major Korean securities research center heads surveyed by Herald Economy assess the recent KOSPI decline to the 6000 level as an excessive price correction driven by fear and supply-demand factors rather than a deteriorating earnings outlook. The research heads from Mirae Asset Securities, Meritz Securities, KB Securities, Shinhan Investment & Securities, Hana Securities, Yuanta Securities, and LS Securities unanimously concluded the current decline does not mark the start of a structural bear market. The sharp drop resulted from a combination of doubts about AI investment sustainability, semiconductor peak-out concerns, foreign profit-taking, leverage liquidation, and ETF rebalancing. The research heads noted that KOSPI's current 12-month forward price-to-earnings ratio stands at 5.8 times, lower than levels seen during the 2008 global financial crisis (6.4 times) and the COVID-19 pandemic (8.5 times), indicating the market has entered a historically rare undervaluation zone with no confirmed deterioration in corporate earnings.
Seven Research Center Heads Diagnose Market Decline as Correction Phase
All seven research center heads surveyed characterized the current market movement as a correction phase within an ongoing bull market rather than the beginning of a bear market. Park Yeon-joo, research center head at Mirae Asset Securities, stated that the decline began with semiconductor industry peak-out concerns and AI investment skepticism, with the downturn amplified by forced selling triggered by short gamma effects from single-stock leveraged ETFs and margin financing. Choi Hyun-jae, research center head at Yuanta Securities, attributed the volatility expansion to profit-taking desires following a sharp short-term rally combined with AI semiconductor-related noise, inflation concerns, and geopolitical risks. Shin Jung-ho, research center head at LS Securities, identified the market's shift in focus from AI investment to monetization as a primary cause.
Yoon Chang-yong, research center head at Shinhan Investment & Securities, emphasized that the decline stems from doubts about AI investment cycle sustainability creating supply-demand shocks rather than economic recession or earnings collapse. He characterized the movement as high-volatility correction within a bull market. The research heads noted that while investor sentiment contracted sharply due to the combination of AI investment sustainability doubts and foreign profit-taking, no deterioration in corporate earnings has been confirmed.
KOSPI Forward PER Falls Below Financial Crisis Levels
The research center heads highlighted that Korean stocks have entered a historically exceptional undervaluation zone. Hwang Seung-taek, research center head at Hana Securities, noted that KOSPI's current 12-month forward PER of 5.8 times falls below levels recorded during the 2008 global financial crisis (6.4 times) and the COVID-19 pandemic (8.5 times). He assessed the current level as a clear undervaluation zone given that stock prices declined sharply while earnings forecasts remain intact.
Park Yeon-joo stated that KOSPI200's forward PER has dropped to approximately 5.5 times, reaching historically low levels, diagnosing this as a result of market fear being excessively reflected in prices. Choi Hyun-jae and Lee Jin-woo, research center head at Meritz Securities, also noted that current PER levels are lower than during the global financial crisis, advising that as long as earnings estimates are maintained, the current zone should be approached from a buying perspective.
Big Tech Earnings and AI Investment Guidance Identified as Key Rebound Conditions
The most important rebound condition identified by the research center heads was U.S. big tech earnings and AI investment guidance. Kim Dong-won, research center head at KB Securities, stated that stable rebound requires support from stabilized market interest rates, restored confidence in AI investment sustainability, and confirmed earnings from major companies. Hwang Seung-taek forecasted that if AI investment and capital expenditure expansion trends are confirmed in U.S. hyperscaler earnings, an upward trend could re-emerge after earnings announcements.
Choi Hyun-jae projected that if second-quarter big tech earnings confirm the validity of the AI investment cycle and interest rate burdens ease, the rally will resume. Yoon Chang-yong predicted that the market will react more sensitively to future investment plans and growth sustainability than to earnings numbers for the time being.
All seven respondents identified semiconductors and AI as the top sectors to lead the rebound. The consensus view held that semiconductors will serve as the central axis given expected memory supply shortages and continued AI infrastructure investment expansion. Shin Jung-ho forecasted that while the rebound will start with Samsung Electronics and SK Hynix, momentum could subsequently spread to overlooked sectors including defense, power machinery, semiconductor materials/parts/equipment, cosmetics, and food.
Regarding foreign selling, the dominant analysis characterized it as profit-taking and rebalancing rather than structural exit. Hwang Seung-taek assessed the selling as having stronger characteristics of profit-taking and rebalancing following sharp gains rather than crisis-driven exit due to damaged national fundamentals. Choi Hyun-jae projected high likelihood of foreign net buying resuming once exchange rate stability and undervaluation appeal become prominent. Yoon Chang-yong also forecasted that foreign capital inflows could accelerate once confidence in U.S. interest rate direction and the AI investment cycle is restored.
The research heads commonly advised individual investors to reduce leverage and make split purchases focused on stocks with high earnings visibility. The variables most concerning to the research heads were AI investment slowdown and interest rates. Hwang Seung-taek cited the possibility of U.S. hyperscalers reducing AI capital expenditure as the primary concern, while Kim Dong-won identified prolonged high interest rates and funding cost burdens as the biggest risk factors.
Research Heads Forecast Year-End KOSPI Range from 6300 to 10900
Research center heads who provided year-end KOSPI forecast bands maintained medium- to long-term upside potential despite the current sharp decline. The most optimistic forecast came from Lee Jin-woo, who presented a year-end KOSPI forecast band of 9500 to 10900 by applying a 12-month forward PER of 7 to 8 times to 2027 KOSPI net profit of 1058 trillion won. He projected additional upside is possible if confidence in earnings estimates recovers due to AI forward industry growth and supply-demand stabilizes.
Choi Hyun-jae presented a target KOSPI upper band of 10000 instead of a specific range. He forecasted the rally will resume once U.S. big tech's AI investment cycle is confirmed and interest rate burdens ease, noting that below the 7000 level, the 12-month forward PER has fallen to the low-6x range, lower than during the global financial crisis.
Hwang Seung-taek presented a range of 8000 to 9500. He anticipated continued upward revisions to semiconductor earnings forecasts if hyperscalers' AI investment continues, assessing that the level is fully achievable even without re-rating given KOSPI's 2026-2027 net profit outlook. Shin Jung-ho presented a forecast band of 6300 to 8500. While expectations for the AI ecosystem remain valid, he focused on the possibility of supply-demand spreading from semiconductor-centered markets to overlooked sectors supported by earnings in the second half.
FAQ
Why did Korean stocks fall to the 6000 level recently?
The decline resulted from a combination of doubts about AI investment sustainability, semiconductor peak-out concerns, foreign profit-taking, leverage liquidation, and ETF rebalancing. Research center heads emphasized that the drop was driven by fear and supply-demand factors rather than deteriorating corporate earnings.
How low is KOSPI's current valuation compared to historical crises?
KOSPI's current 12-month forward PER stands at 5.8 times, lower than the 6.4 times recorded during the 2008 global financial crisis and the 8.5 times during the COVID-19 pandemic. KOSPI200's forward PER has fallen to approximately 5.5 times, reaching historically low levels.
What do research heads identify as key conditions for market rebound?
The research center heads identified U.S. big tech second-quarter earnings and AI investment guidance as the most important rebound conditions. They stated that confirmation of AI investment cycle validity and easing interest rate burdens are necessary for the rally to resume, with semiconductors and AI expected to lead the recovery.
