[Edaily Reporter Park Sun-Yeop ] Analysts have concluded that foreign investor sentiment is the key factor that will determine whether the KOSPI will continue to fall or rebound. If the recent pattern—where foreign investors buy stocks while retail investors sell—continues, the current stock market could be closer to the rebound phase following the “China Shock” and “Dubai Shock” than it was during the collapse of the information technology (IT) bubble.
Lee Kyung-soo, a researcher at Hana Securities, stated in a report on the 22nd, “The key signal for a KOSPI rebound is the pattern of foreign buying and retail selling,” adding, “For the time being, a strategy of monitoring the stability of the won-dollar exchange rate and responding in line with foreign investor sentiment is appropriate.”

The KOSPI fell to the 6,800 level, marking a decline of approximately 25% from the high of 9,052 recorded on the 19th of last month. Hana Securities cited four instances in the past where the KOSPI, after rising more than 20% over the preceding year, plummeted 25% from its peak: the first and second corrections of the 2002 IT bubble, the 2004 China Shock, and the 2009 Dubai Shock.
Performance following these sharp declines varied depending on foreign investor sentiment. One year after the 25% decline from the peak, the KOSPI’s return stood at -24.4% and -13.0% during the first and second corrections of the IT bubble, respectively. In contrast, it rose by 16.5% and 26.6% following the China Shock and the Dubai Shock, respectively.
During the IT bubble, foreign selling continued even as stock prices fell, widening the index’s decline. Conversely, during the China Shock and Dubai Shock, foreign investors bought stocks as part of portfolio rebalancing, while retail investors sold their holdings once prices recovered to their purchase levels. Subsequently, the index also rebounded.
The analyst stated, “The fact that foreign buying momentum has persisted recently is a key piece of evidence suggesting that the current situation is more similar to the China Shock and Dubai Shock than to the IT bubble,” adding, “If foreign buying continues, investors could consider buying at the bottom, assuming an expected return of 15–25% over the next year.”
However, he emphasized that to assess the sustainability of foreign buying, one must also examine the stability of the won-dollar exchange rate. He explained that since foreign capital flows could shift if exchange rate volatility intensifies again, it is necessary to monitor both the exchange rate and foreign supply and demand simultaneously.
He assessed that some of the factors that had fueled market volatility are now easing. This is because margin lending and short positions turned upward on the 21st, suggesting that forced liquidations have largely subsided, and net inflows into single-stock leveraged exchange-traded funds (ETFs)—such as SamsungElectronics(005930)and SK hynix(000660) —have been declining since mid-month. A reduction in new capital inflows into leveraged ETFs could also lower the tracking trade pressure generated during their management.
The firm also dismissed concerns that semiconductor demand has peaked. Since the net profit and capital expenditure (CAPEX) forecasts for U.S. Big Tech companies are rising in tandem for both this year and next, and earnings outlooks for software companies are also showing steady improvement, the firm believes it is premature to conclude that investment in artificial intelligence (AI) and semiconductor demand have reached their peak.