How Long Will the Slide Last? Strategists Say Kospi Rebound Hinges on Big Tech Earnings

Kospi breaks below 6,000

Emergency review by market strategists

"The AI cycle isn't over yet...

Big Tech earnings are the key variable for a market rebound"

Kospi heavily weighted toward memory-chip stocks

No clear buyers to absorb foreign selling

Tough stretch may last at least two to three weeks

Focus on SK Hynix shareholder returns

Quick recovery to the previous peak looks unlikely

Hold cash and spread investments across core companies

On Oct. 15, South Korea's Kospi broke below 6,000 and slid into the 5,500 range. The Kospi and Kosdaq both plunged more than 7%, triggering circuit breakers in succession. Doubts over AI profitability deepened after Anthropic's third-quarter results, while concerns over sticky U.S. inflation also fueled expectations of higher interest rates. Korea's stock market, which has heavy exposure to memory semiconductors, fell further because there were few buyers to absorb foreign selling.

The Korea Economic Daily conducted an emergency survey of six market strategists on Oct. 15 to gauge the market outlook. Their view was that earnings forecasts have not changed materially, but the burden of higher rates and skepticism over 2028 earnings are weighing on share prices.

◇"Rates and fund flows are weighing more heavily on Korean stocks"

Jeong Moo-il, chief investment officer at Truston Asset Management, said Anthropic's third-quarter results were what sealed the day's decline. Monthly annual recurring revenue stalled at its July peak, while quarterly revenue growth also slowed. Park Yeon-joo, head of research at Mirae Asset Securities, said Anthropic's slower growth and a sharp drop in CoreWeave bond prices heightened concerns about returns on AI investment.

Strategists also cited Korea's concentration in memory stocks and a gap in market demand as reasons its losses outpaced peers. Jeong said Taiwan has a larger non-memory value chain centered on TSMC, while Korea is more concentrated in memory, leaving it more exposed. Mok Dae-gyun, chief executive officer of KCGI Asset Management, said share buybacks that had supported the market have effectively ended. Domestic demand, he said, is now in a vacuum.

Lee Jin-woo, head of research at Meritz Securities, said the problem is not market panic but the absence of foreign buying. Mok added that long-only funds and global investors have shifted into risk-management mode, and that the difficult stretch could continue for at least two to three weeks. Kim Hak-kyun, head of research at Shin Young Securities, pointed to rising U.S. interest rates, while Kim Dong-won, head of research at KB Securities, cited macro uncertainty including rates and oil prices as drivers of the selloff. Park said foreign selling was concentrated in profit-taking and fund flows should normalize in line with fundamentals.

◇"Semiconductor conditions should remain solid for two to three years"

Strategists remain optimistic on AI-related earnings. Park said AI represents a foundational technology revolution and the semiconductor cycle should remain firm for the next two to three years. Kim Hak-kyun said the market reaction to a string of negative developments looks excessive, though high volatility appears unavoidable for now. He added that SK Hynix's drop of more than 50% from its high also reflects a backlash after the stock had risen more than 17-fold.

As possible catalysts for a rebound, strategists pointed to the U.S. midterm elections, SK Hynix earnings and shareholder returns. Lee said the market also began to stabilize in the previous cycle after Microsoft and Amazon reported second-quarter earnings. At the time, investors took comfort as key AI companies offered a clearer outline of the investment cycle. He expects a similar pattern this time. If Big Tech can restore confidence that AI-related revenue is indeed holding up, foreign fund flows are likely to move in tandem.

◇"Recovery to the previous peak this year will not be easy"

The response strategies experts suggest are endurance and selectivity. Mok recommended raising cash. Park urged diversified investment and staggered buying focused on leading global companies. Lee said the market is in a historically oversold zone, making a rebound more probable than a further decline, so this is a period to hold on through. He also said investors should avoid leverage because volatility could rise further. Even if a technical rebound appears, he advised against treating it as a trend reversal and recommended buying in stages while watching trading value, foreign fund flows and stability in large semiconductor names.

Strategists were unanimous that reclaiming the previous peak of 9,114.55 will be difficult in the short term. Lee said the chances of returning to that high this year are not strong. Confidence in semiconductor earnings growth and improved foreign fund flows need to come first. He added that a dramatic recovery to the old peak is more likely next year. Sharp short-term rebounds are always possible in an oversold market, but a return to the earlier bullish index levels would require confirmation of a much stronger cycle, he said.

Ahn Sang-mi, Korea Economic Daily reporter saramin@hankyung.com

Ko Song-hee, Korea Economic Daily reporter hgsong@hankyung.com