KB証券 said on the 29th that the KOSPI index is undergoing an excessive correction, making a sharp rebound likely ahead.
Kim Dong-Won, head of research at KB証券, analyzed, "In July, the KOSPI index fell 28.9%, an unusual decline that exceeded the monthly drops seen during the two past financial crises."
In fact, the KOSPI's monthly decline was 27.2% in October 1997, when the International Monetary Fund (IMF) foreign exchange crisis occurred, and 23.1% in October 2008 during the global financial crisis.
Kim cited concerns about the sustainability of artificial intelligence (AI) investment and the possibility of intensified competition among Chinese memory chipmakers as reasons behind the recent plunge in the KOSPI.
However, Kim explained, "U.S. big tech corporations share the view that a lack of AI investment is a bigger risk than overinvestment," adding, "Big techs with sufficient financial capacity are likely to continue investing in AI infrastructure for years to come, even by increasing external borrowing."
He also assessed that, based on an analysis of technological revolutions over the past 200 years, it is premature to call this a bubble, noting that current AI investment is only about 2.5% of U.S. gross domestic product (GDP), compared with the typical 5%–7% of GDP.
On concerns stemming from China, he noted, "The CXMT IPO and China's plans to produce deep ultraviolet (DUV) equipment were in line with market expectations," adding, "To convert these into real industrial competitiveness, considerable additional time will be needed for performance verification, Production yield stabilization, and customer qualification."
He added, "Because this correction is an extreme drop driven by sentiment rather than fundamentals, it will instead serve as a platform for a strong rebound," analyzing that "the semiconductor sector is passing the tail end of an extreme correction and is entering visible range for a V-shaped rebound."
He also said valuations are attractive. With Samsung Electronics and SK hynix plunging 39% and 47%, respectively, from their peaks, the 12-month forward price-earnings ratios (PER) are 3.7 for Samsung Electronics and 3.8 for SK hynix, both below a PER of 4.