The KOSPI closed at 6,516.27 on July 20, down 304.33 points or 4.46%, marking its second consecutive day of steep declines. The index has fallen nearly 2,900 points from its June 19 intraday high of 9,385.59, driven by semiconductor sector uncertainty and leverage-driven selling pressure. Despite the KOSPI's 12-month forward price-to-earnings ratio dropping below 6x — its lowest level since the 2004 credit card crisis and beneath the 2008 financial crisis low of 6.27x — analysts at major Korean brokerages forecast box-range trading rather than a V-shaped recovery, citing unresolved concerns over AI demand sustainability and ongoing deleveraging in semiconductor stocks.
KOSPI Records 4.46% Decline to 6,516.27 on July 20
According to the Korea Exchange, the KOSPI fell 304.33 points (4.46%) to close at 6,516.27 on July 20, following a 6.37% drop on July 16. The KOSDAQ index declined 5.33% to 749.64, while the won-dollar exchange rate closed the weekly session at 1,478.4 won, down 0.1 won from the previous trading day's close.
The index has declined nearly 2,900 points in one month compared to its intraday high of 9,385.59 on June 19. The KOSPI's 12-month forward price-to-earnings ratio fell below 6x, reaching its lowest valuation level since the 2004 credit card crisis. This marks the first time the forward PER has dropped below 6x since 2004, falling beneath the 6.27x recorded during the 2008 financial crisis.
Market observers attribute the decline to the spread of uncertainty and anxiety surrounding the semiconductor industry across the broader market. The downturn reflects cracks in the artificial intelligence industry narrative, valuation corrections, and supply-demand shocks from leverage liquidation, rather than fundamental deterioration. The negative cycle between narrative variables and sentiment-supply dynamics continues.
Analysts Forecast Box-Range Trading Amid Semiconductor Uncertainty
Jun-young Kim, a researcher at iM Securities, stated: "Short gamma due to the expansion of leveraged products amplifies volatility rather than significantly affecting direction. With credit balances accumulated, high volatility is expected to increase market fluctuations."
Kim added: "The box-range level we previously expected to occur around the KOSPI 10,000 level has lowered. While our view on the path hasn't changed significantly, there are many hurdles remaining regarding the sustainability of the semiconductor cycle. Rather than the index falling all at once, it appears likely that an exploratory period of sideways movement in a box range, examining whether it can break through 10,000 points, will continue until the end of the year."
Jun-ki Cho, a researcher at SK Securities, noted: "The environment is such that it wouldn't be strange for rebound buying to enter at any time due to excessive decline and increased valuation attractiveness. However, it's hard to deny that the narrative has formed unfavorably for now."
Big Tech Earnings This Week Identified as Key Turning Point
Analysts identified corporate earnings as the primary catalyst for resolving the negative cycle. Big Tech earnings announcements starting this week, including Alphabet and Intel, are drawing attention.
Cho from SK Securities stated: "Big Tech earnings coming out starting this week will be a watershed."
Ji-young Han, a researcher at Kiwoom Securities, commented: "The AI companies' earnings season starting this week will be a turning point that simultaneously examines the sustainability of AI demand and whether semiconductor stocks can escape the deleveraging and de-rating phase. Since the semiconductor industry's original narrative and fundamental recovery are now urgent matters rather than leverage-driven supply issues, it's appropriate to focus on corporate earnings events."
FAQ
What caused the KOSPI to fall 4.46% on July 20?
The KOSPI declined 304.33 points to 6,516.27 on July 20 due to semiconductor sector uncertainty and leverage-driven selling pressure. The index dropped 2,900 points from its June 19 high of 9,385.59, with analysts citing cracks in the AI industry narrative and ongoing deleveraging as key factors.
Why are analysts forecasting box-range trading instead of a V-shaped recovery?
Despite the KOSPI's 12-month forward PER falling below 6x to historical lows, analysts at iM Securities, SK Securities, and Kiwoom Securities forecast box-range sideways movement. Jun-young Kim from iM Securities stated that unresolved concerns over semiconductor cycle sustainability mean "an exploratory period of sideways movement in a box range will continue until the end of the year."
What upcoming events could affect Korean stock market direction?
Big Tech earnings announcements starting this week, including Alphabet and Intel, are identified as potential turning points. Ji-young Han from Kiwoom Securities stated that "the AI companies' earnings season starting this week will be a turning point that simultaneously examines the sustainability of AI demand and whether semiconductor stocks can escape the deleveraging phase."
