Kospi, Down 14.46% in a Week, Looks to Earnings and Fund Flows for Rebound

NH Investment & Securities Sees 5,100-6,100 Range This Week

U.S. Tech Earnings, Oct. 22 BOK Meeting in Focus

Can the Kospi extend its rebound after halting a steep selloff? This week, from Oct. 19 to Oct. 23, earnings and investment plans from U.S. technology companies will test the resilience of South Korea's stock market. Brokerages say semiconductor shares have become more attractive on valuation, but the upturn is unlikely to last unless foreign selling eases and funding concerns surrounding AI companies subside.

On Oct. 18, the Kospi stood at 5,668.05 after closing there on Oct. 16, up 2.05% on the day. Even so, it posted a weekly loss of 14.46%. NH Investment & Securities projected a trading range of 5,100 to 6,100 for this week.

One of the market's biggest concerns is whether funding will continue to support AI infrastructure investment. If high interest rates stay elevated for longer, companies that have relied on borrowing to expand data centers could come under greater strain. That is the backdrop to worries over CoreWeave's bonds spilling into sentiment on semiconductor investment.

Still, the broader AI industry should not be judged by a single standard because companies' financial conditions differ. Lee Sang-jun, a researcher at NH Investment & Securities, said bonds issued by large technology companies and other investment-grade debt remain relatively firm, unlike the unsecured bonds at CoreWeave where concerns have been concentrated. Investors need to assess whether companies can absorb high funding costs even if profits do not materialize immediately, he added.

Lee also said South Korea's early-October exports and Taiwan Semiconductor Manufacturing Co.'s third-quarter earnings confirmed signals supporting semiconductor demand. If the CoreWeave issue does not spread across the industry, semiconductor shares that have suffered steep losses could lead a rebound.

The calendar this week may help confirm that view. According to an earnings schedule compiled by Daishin Securities, Meta Platforms, Lam Research, IBM and Texas Instruments are due to report on Oct. 21, while Western Digital is set to release results on Oct. 22. Lee Kyung-min, a researcher at Daishin Securities, said those reports and South Korea's Oct. 1-20 export data should be used to gauge whether AI investment and semiconductor demand are holding up.

Still, in past market routs, brief rebounds did not necessarily lead to a trend reversal. Among 12 cases in which the Kospi fell more than 10% over seven trading days, 83% saw the index rise a week later, according to Yuanta Securities. But in the five cases where the drop exceeded 15%, only 20% were higher a month later.

Domestic monetary policy is another variable. The Bank of Korea will hold a Monetary Policy Board meeting on Oct. 22 to set the benchmark interest rate. Jung Yeo-kyung, a researcher at NH Investment & Securities, said investors should assess the effects of the July and August rate increases while watching for signals on the timing and pace of any additional hikes. A key focus will be how the central bank signals the possibility of a November increase.

Brokerages favor gradually buying large-cap stocks whose earnings outlook has not deteriorated. Rather than buying simply because prices have fallen sharply, investors should also check profit forecasts and funding capacity. Lee Jae-won, a researcher at Yuanta Securities, said he favors a staggered bargain-buying strategy for large-cap stocks that have fallen excessively.