Looking at past cases where the KOSPI index surged and then plunged, a report from the securities industry on the 22nd said the difference in gains a year later is closely related to foreign investors' supply-and-demand trends.
The KOSPI index is currently in the 6,800-point range, down about 25% from the high of 9,052 points on June 19.
According to Hana Securities, there were four cases where the KOSPI index jumped more than 20% from a year earlier and then fell nearly 25% from its peak: the first and second IT bubbles, the China shock, and the Dubai shock.
However, the returns one year after the maximum 25% drawdown differed in all four cases. In the first IT bubble, the KOSPI index fell 24.4% a year later, and in the second IT bubble, the KOSPI index fell 13%.
By contrast, during the China shock and the Dubai shock, the KOSPI index rose 16.5% and 26.6%, respectively, a year later.
Lee Kyung-soo, a researcher at Hana Securities, said, "Whether there is further decline is decided by foreign investors," and analyzed, "During the IT bubble, despite falling stock prices, continued foreign selling widened the drawdown."
By contrast, during the China shock and the Dubai shock, there was a clear pattern of foreign buying for rebalancing and individual selling, which was followed by an index rebound.
The researcher said, "The recent continuation of foreign buying is a key basis for interpreting the current phase as closer to the China and Dubai shock cases, where the index rebounded, than to the IT bubble," adding, "If foreign buying continues to hold, bottom-fishing is possible based on an expected return of 15%–25% in a year."
He added that for the time being, after confirming exchange rate stabilization, trading in the same direction as the foreign flow is appropriate.
He also saw that continued individual selling after a sharp drop, as in the past, would be limited. With the government's housing market normalization policy prompting a MoneyMove into stocks as a sign of the times, he noted that, as of the 21st, forced selling had largely run its course.
He also saw that, after mid-month, a decrease in net creations of single-stock leveraged exchange-traded funds (ETFs) could act as a factor in easing volatility.
Meanwhile, the researcher said, "Capital expenditures (CAPEX) and net profit forecasts for U.S. big tech and hyperscalers show a clear uptrend this year and next," adding, "Concerns about a semiconductor demand peak are overstated."