Goldman Sachs’ chief Asia-Pacific equity strategist Timothy Moe stated that the South Korean stock market is expected to rebound after a circuit-breaker-triggering sell-off. In the long run, this will prove to be a technical correction, albeit a frightening one within a prolonged bull market. Fundamentals remain very strong.
The Korea Composite Stock Price Index (KOSPI) plunged as much as 8.8% on Monday, leading the decline among Asian tech stocks. This drop occurred after a strong rally fueled by optimism over artificial intelligence, during which many investors used leverage to chase gains in a handful of semiconductor and tech stock sectors.
Moe noted: “There were clear signs of increasing speculative activity, particularly among South Korean retail investors who were especially keen on buying some leveraged ETFs. What we are seeing now is that these accumulated positions are being forced to sell, and the leverage effect is further exacerbating the decline.” Last week, Goldman Sachs raised its outlook for the South Korean and Taiwanese stock markets, citing expectations that the AI boom will drive profit growth in these tech-heavy markets. Moe added on Monday that valuations of South Korean stocks are very reasonable and expects potential profits to continue fueling growth. (Jin Shi)