The KOSPI, which at one point fell to the 5,600 level last week, rebounded sharply to 6,595.45 on the last trading day. Still, retail investors remain uneasy. Volatility has grown to the point that sidecars and circuit breakers have been triggered day after day, leaving no confidence that the rebound trend will continue.
The domestic stock market is expected to remain highly volatile this week (Aug. 3–7). While whether sentiment toward semiconductors recovers will determine the index's direction, bargain hunting may flow in on perceptions that the drop was excessive. Still, subdued sentiment and profit-taking could limit the rebound.
In addition, major indicators including the U.S. July Institute for Supply Management (ISM) purchasing managers index (PMI), ADP private employment and nonfarm payrolls will be released. Among companies, AMD reports earnings on Tuesday and SanDisk on Wednesday.
Shin Eol, an analyst at Sangsangin Investment & Securities, said, "With the market's expectations for earnings running high, recently even corporations posted strong results but failed to reverse share-price trends," and added, "We need to see whether a rebound continues after earnings releases."
◇ A 14% surge after two straight days of circuit breakers… semiconductor sentiment recovery is key
The domestic market last week (July 27–31) showed "unprecedented" volatility as doubts grew over the persistence of artificial intelligence (AI) investment, concerns mounted over intensified competition from China's semiconductor self-sufficiency, and tensions rose in the Middle East. Circuit breakers were triggered for the first time ever on two consecutive days, the 28th and 29th, in the main board, but on the 31st an unusual session unfolded with the KOSPI jumping more than 17%.
Brokerages see room for further rebound because the recent plunge stemmed more from weakened sentiment and supply–demand instability than from corporate earnings or an economic slowdown.
Lee Kyung-min, an analyst at Daishin Securities, said, "Forward earnings per share (EPS) and profit forecasts for 2026 and 2027 are being revised higher, and the leading economic index is also maintaining an uptrend," adding, "It is being confirmed that the recent negatives have not yet damaged the direction of earnings and the economy."
Still, because investor sentiment has already been severely hurt, profit-taking could cap gains even if the index rebounds. In fact, when the KOSPI rose more than 17% in a single day on the 31st of last month, individuals were net sellers of about 827 billion won. It was the largest daily net selling on record.
Heo Jae-hwan, an analyst at Eugene Investment & Securities, said, "The KOSPI could climb to the high-6,000 range faster than expected, but the issue is what comes after that," adding, "More important than supply overhangs and liquidation volumes is trust in the market."
The analyst said, "The view that 'price declines are buying opportunities,' which had persisted since last year, has been shaken, and the neglect of KOSDAQ and non-semiconductor stocks has deepened."
◇ Impact of single-stock leverage rules and U.S. jobs data also in play
How much tighter rules on single-stock leveraged products can curb excessive market volatility is another variable. Starting on the 31st of last month, the basic margin for single-stock leveraged exchange-traded funds (ETFs) and exchange-traded notes (ETNs) was raised to 30 million won from 10 million won. Trading conditions were also tightened, recognizing only cash, not stocks or ETFs, as margin.
On the first day of implementation, turnover in 16 single-stock leverage and inverse products was about 3 trillion won, plunging to a quarter of the previous day's 12.4 trillion won. While some say the higher margin has partially cooled overheated trading, financial authorities plan to swiftly implement additional measures, including per-investor limits and larger minimum trading units.
Major U.S. economic indicators to be released this week are also expected to influence the market's direction. While growth in July ADP private employment is expected to slow, nonfarm payrolls are seen increasing, suggesting labor market readings could be mixed.
However, because the Federal Reserve (Fed) is placing more weight on inflation than employment in its policy judgment, market attention is likely to shift to prices and global oil.
Kim Yu-mi, an economist at Kiwoom Securities, said, "Given that June personal consumption expenditures (PCE) inflation slowed more than expected, the Fed is likely to keep its current policy stance for the time being and watch the inflation trend rather than take additional steps," adding, "Rather than further raising the policy rate, it will likely try to keep financial conditions tight through communications that maintain vigilance on inflation."