[Edaily Reporter Kim Kyung-eun ] While the KOSPI has plummeted by more than 28% over the past month—marking its steepest decline since the COVID-19 pandemic—forecasts suggest that downward pressure will gradually ease. However, analysts say it is unlikely to see a “V-shaped recovery” similar to that seen during the COVID-19 pandemic. This is because factors such as interest rate pressures, concerns over a slowdown in investment by big tech companies, and the impact of leveraged exchange-traded funds (ETFs) are expected to limit the pace of recovery.

Heo Jae-hwan, an analyst at EUGENE INVESTMENT & SECURITIES, stated in a report on the 27th, “Excluding the possibility of a financial crisis, the recent decline in the domestic stock market has been excessive in the short term.”

The KOSPI fell 28.5% from its intraday high of 9,114 points on June 21 to 6,516 points on July 20. SK hynix(000660) Stock prices also fell 39.6% from their closing price highs.

This rate of decline in the KOSPI is the steepest since the COVID-19 pandemic (-36%), the 2022 U.S. interest rate hike cycle (-31%), and the 2008 global financial crisis (-54%).

Researcher Heo assessed that the recent correction is more similar to the short-term plunge during the COVID-19 pandemic than to the prolonged bear market of 2022. However, he noted that it is unlikely to see a rapid rebound like the one seen back then.

First, he pointed out that the monetary policy environment has changed significantly. While global monetary easing was in effect during the COVID-19 pandemic, expectations are currently high for further interest rate hikes by the Bank of Korea. Accordingly, he predicted that even if stock prices bottom out, it would take at least a month to recover the losses.

They also cited the slowdown in profitability among U.S. Big Tech companies as a source of concern. Although Alphabet recently reported solid earnings, its operating profit margin fell from 36.6% in the first quarter to 34.2% in the second quarter, and its free cash flow turned negative for the first time. Consequently, analysts noted that market skepticism regarding the sustainability of artificial intelligence (AI) capital expenditures is likely to persist.

The report also noted that the impact of single-stock leveraged ETFs remains. While trading volume for the SamsungElectronics single-stock leveraged ETF has fallen to pre-launch levels, trading volume for the SK hynix leveraged ETF still exceeds that of the underlying stock. Analyst Heo explained, “Although the aftermath of leveraged ETFs is in the process of being resolved, it has not yet been fully resolved.”

However, he assessed that valuation pressures have eased significantly. The 12-month forward price-to-earnings ratio (P/E ratio) of the KOSPI, excluding semiconductors, has fallen to 7–8 times—the lowest level since April of last year.

Researcher Heo stated, “Given the exceptional magnitude of the short-term stock price decline, downward pressure on the domestic stock market will gradually subside,” but added, “It will take a little more time for stock prices to fully recover.”

He continued, “The future recovery will not be limited to semiconductors,” adding, “Investors should pay attention not only to semiconductors and IT hardware—which have seen the largest declines from their peaks—but also to industrial goods such as machinery, shipbuilding, and construction.”