The Kospi is displayed at the Hana Bank dealing room in Jung-gu, Seoul, on Friday, after the index closed up 184.03 points, or 2.52 percent, at 7,475.94. [Yonhap]
The Kospi is displayed at the Hana Bank dealing room in Jung-gu, Seoul, on Friday, after the index closed up 184.03 points, or 2.52 percent, at 7,475.94. [Yonhap]

South Korea's stock market faces a series of major events next week, including the release of US consumer price index data, key corporate earnings reports and the Bank of Korea's Monetary Policy Board decision on the benchmark interest rate. After this week's heightened volatility — driven by semiconductor peak concerns and the unwinding of leveraged positions — market attention is focused on whether those upcoming catalysts can trigger a rebound.

The Kospi closed at 7,475.94 on Friday, up 184.03 points, or 2.52 percent, from the previous session, according to Korea Exchange. For the week of July 6 to 10, the Kospi fell 7.57 percent while the Kosdaq dropped 3.57 percent.

Markets this week were rattled by semiconductor peak concerns that emerged even after Samsung Electronics posted strong earnings, as well as by the unwinding of leveraged investments. Military tensions between the United States and Iran also weighed on investor sentiment. "The market has recently entered a phase of 'low vitality and high volatility,' with trading volumes shrinking while price swings grow," said Kang Jin-hyeok, a researcher at Shinhan Investment. "As funds concentrate in a handful of stocks and the exchange-traded funds that track them, overall market activity has contracted, and the structure is now such that negative news triggers greater volatility than it used to."

Brokerages interpreted the current correction as an oversold phase driven by sentiment and supply-demand shocks rather than a deterioration in corporate fundamentals. "The current pullback reflects a preemptive pricing-in of concerns about a slowdown in AI capital expenditure, not a deterioration in fundamentals," said Na Jeong-hwan, a researcher at NH Investment. "Some unwinding of leveraged positions has amplified selling pressure, but this is closer to a simple digestion of supply overhang."

Lee Jae-won, a researcher at Yuanta Securities Korea, said no signals had yet emerged to support a worsening of the memory chip cycle — such as a reduction in hyperscaler capital expenditure or a decline in long-term HBM supply contracts. "This correction has more of the character of a valuation adjustment than a fundamental deterioration," he said.

NH Investment projected a Kospi trading range of 6,900 to 7,900 points for next week, citing upward revisions to corporate earnings forecasts as a positive factor and concerns over a slowdown in AI capital expenditure along with profit-taking as downside risks. "For now, the market is likely to continue trading in a range as investors assess whether semiconductor earnings growth has peaked," Na said. "A sustained rebound in share prices will require events that confirm upward revisions to corporate earnings forecasts, continued AI demand and an expansion of capital expenditure by big tech companies."

Second-quarter earnings from major US companies are also due in rapid succession. Large financial firms including JPMorgan, Citigroup and Goldman Sachs report on Monday, followed by Morgan Stanley and Dutch semiconductor equipment maker ASML on Tuesday, and then TSMC, the world's largest foundry, and Seagate on Wednesday. The results and forward guidance from ASML and TSMC in particular are seen as key variables for gauging whether AI semiconductor investment will continue and which direction the industry cycle is heading.

The US June CPI, due Monday, and the producer price index, due Tuesday, are also closely watched. US June retail sales data will be released Wednesday, offering a read on consumer spending trends in addition to inflation.

"Given the decline in international oil prices and the easing of the ISM manufacturing and services price indexes in June, we should be able to confirm whether inflationary pressure has passed its peak," said Yoo Myeong-gan, a researcher at Mirae Asset Securities. "Since short-term interest rates already price in a considerable probability of a rate hike this year, confirmation of easing inflation could limit further upward pressure." However, he added that long-term rates may continue to face upward pressure from the risk of an oil price rebound tied to the US-Iran conflict and the spillover from rising global rates originating in Japan.

Domestically, the Bank of Korea's Monetary Policy Board will decide on the benchmark interest rate on Wednesday. With Bank of Korea Governor Rhee Chang-yong having directly mentioned the need for a rate hike, the market has in effect come to treat an increase as a foregone conclusion.

"Unlike the buoyant semiconductor cycle, employment and domestic demand remain sluggish, and household debt stands at 88 percent of GDP, making a sharp rate hike difficult," Yoo said. "Given the possibility that some rate-hike expectations could be partially unwound, short-term bonds still hold investment appeal."

Brokerages believe this week's sharp decline has significantly reduced valuation pressure on the domestic market, and that the US CPI data and major corporate earnings due next week could serve as a catalyst for a rebound. Daishin Securities noted that the Kospi's 12-month forward price-to-earnings ratio had fallen to 6.18 times — below the 6.27 times trough recorded during the 2008 global financial crisis — signaling that the index has entered a historically undervalued zone.

"Short-term volatility may persist given that key support levels have been breached, but the market is now at a price level where even modest positive news could trigger a swift rebound," said Lee Gyeong-min, a researcher at Daishin Securities. "If the US CPI and the start of the second-quarter earnings season deliver results that meet market expectations, investor sentiment could recover quickly."


hajun825@heraldcorp.com