South Korea's benchmark KOSPI index has fallen more than 20% from its all-time high on June 22, but Citigroup analysts remain bullish, reiterating a year-end target of 10,000 points. This implies a potential upside of over 40% from current levels, according to a note published Monday.
What Triggered the Sell-Off?
The KOSPI outperformed major global markets in 2025 and carried that momentum into the first half of 2026. However, concerns over excessive artificial intelligence (AI) spending have sparked a sharp downturn over the past four weeks. The index's heavy concentration in semiconductor stocks—Samsung and SK Hynix together account for more than 60% of its market capitalization—has amplified the decline. Additionally, speculative trading by domestic retail investors, particularly in single-stock leveraged ETFs tied to these two giants, has added downward pressure. Since the launch of these ETFs on May 27, retail investors have poured a net 14 trillion won ($9.4 billion) into them, and many are now sitting on steep losses as the semiconductor trade unwinds.
Why Citi Expects a Recovery
Despite the sharp pullback, Citi analysts argue the sell-off has already peaked. They believe strong fundamentals, combined with a market-friendly policy mix, will drive a meaningful recovery in the second half of 2026. The firm views the recent weakness in semiconductor stocks as a temporary setback rather than a structural failure. “We think the recent share price pullback of KOSPI equities, led by KR memory suppliers, is more of a technical correction driven by market-wide profit-taking and therefore may represent a buying opportunity,” the analysts wrote. Notably, the KOSPI remains up roughly 65% year-to-date despite the correction.
Key Catalysts to Watch
For Citi's aggressive target to materialize, a swift stabilization in tech sentiment is critical. Investors should monitor upcoming quarterly earnings calls from Samsung and SK Hynix, where guidance on next-generation AI memory demand could either validate the dip-buying thesis or extend the sell-off. Domestic retail flows will also be key—whether local investors double down or capitulate—along with foreign capital movements that could help balance single-stock concentration. If global chip demand holds firm through the final two quarters, the recent turbulence may prove a brief detour in a broader rally.
Related reading: Kospi Drops 4% as Samsung, SK Hynix Rout Deepens; Barclays Sees Semiconductor Rebound and Dow Adds 230 Points as Chip Stocks Rally Ahead of Big Tech Earnings Reports.
This article is for informational purposes only and does not constitute financial advice.
