KOSPI declined over 25% in less than a month from June 22, prompting Korean securities firms to focus on upcoming US Big Tech and semiconductor earnings scheduled for next week starting July 22. Analysts attribute the drop to AI investment slowdown concerns and semiconductor cycle uncertainty rather than systemic risk, with data center permit issues in New York and Federal Reserve hawkish stance adding pressure. Shinhan Securities research shows 67% of KOSPI's 48 instances of 8%+ single-day declines since 2000 rebounded within a week, averaging 3.6% returns, suggesting the current volatility may offer rebound opportunities if AI investment momentum is confirmed.
KOSPI Shows 67% Rebound Rate After Sharp Declines Since 2000
KOSPI recorded 9114.55 points on June 22 before entering a correction exceeding 25% in less than a month, according to Korea Exchange data released on July 19. Lee Sang-yeon, a researcher at Shinhan Securities, stated the market remains in a bull market trajectory and mechanical selling during sharp declines often results in missing subsequent rebounds unless a global bubble collapse or financial system crisis occurs.
Shinhan Securities analyzed 48 instances since 2000 when KOSPI fell 8% or more in a single day, finding 67% rebounded within one week with an average return of 3.6%. Among 13 cases where six-month returns remained negative, 11 occurred during the IT bubble and two during the 2008 Lehman Brothers bankruptcy. Lee noted the recent decline does not reflect fundamental damage and emphasized enduring volatility as the key factor.
Alphabet and Intel Earnings to Test AI Investment Sustainability
Korean stocks reacted more strongly to AI investment slowdown concerns and semiconductor sector anxiety than to US inflation data or Federal Reserve tightening, with selling pressure concentrated on Samsung Electronics and SK Hynix following New York's data center permit suspension and infrastructure investment pace worries. Alphabet reports earnings on July 22 (local time), followed by Intel on July 24, Microsoft and Meta on July 29, marking a critical test for market judgment on AI investment continuity and semiconductor cycles.
Lee Jae-won, a researcher at Yuanta Securities, stated the market failed to rebound despite TSMC's strong performance and lacks clear rebound momentum until Alphabet's earnings, emphasizing Big Tech capital expenditure guidance as the most important factor for confirming AI investment expansion. He added leverage investment should continue to decrease during volatility expansion, with Google's earnings and AI investment plans serving as the core event to revive market sentiment next week.
Analyst Views on Investor Liquidity and Market Sentiment
Concerns about individual investor purchasing power are excessive, according to analysts, as recent declines in domestic market customer deposits have progressed steeply compared to the KOSPI peak during the 2021 retail investor movement. Kim Jae-seung, a researcher at Shinhan Investment & Securities, stated it is premature to interpret deposit decreases as retail investor exodus, explaining recent reductions resulted from active low-price buying during the downturn.
Kim added customer deposit reinflows and increased retail buying will require reduced domestic market volatility and renewed expectations for AI investment expansion.
FAQ
What caused KOSPI stocks to decline over 25% in less than a month from June 22?
Analysts attribute the decline to AI investment slowdown concerns, semiconductor cycle uncertainty, data center permit issues in New York, and Federal Reserve hawkish stance, rather than systemic financial risk.
Why are Alphabet and Intel earnings on July 22 and July 24 important for Korean stocks?
These earnings will test market judgment on AI investment sustainability and semiconductor cycles, with Big Tech capital expenditure guidance serving as the key factor for confirming AI investment expansion momentum that could drive KOSPI rebound.
