Bank of Korea: "Limited Possibility of a Sustained Downturn in Domestic Stock Prices"

Bank of Korea Reports to National Assembly’s Planning and Finance Committee

The Bank of Korea recently commented on the recent decline in domestic stock prices, stating that “the likelihood of a shift to a sustained downward trend is limited.”

In a work report submitted to the National Assembly Planning and Finance Committee on July 9, the Bank of Korea explained, “Earnings forecasts for semiconductor companies continue to be revised upward, and the government is making efforts to improve the capital market system.”

Regarding the recent movement of the KOSPI, the Bank assessed, “Since May, stock prices have experienced significant fluctuations due to foreign investors realizing gains and portfolio rebalancing at the end of the half-year, among other factors.”

The Bank went on to forecast, “Going forward, stock prices are likely to remain highly volatile, influenced by concerns related to the artificial intelligence (AI) industry, the monetary policy stance of major economies, and changes in global capital flows.”

However, the Bank emphasized that “the global semiconductor market is expected to maintain an expansionary trend for a considerable period, driven by the growing range of AI applications and increased investment in related infrastructure.”

This analysis takes into account increased demand for computational power due to AI proliferation, continued investment by major big tech companies seeking to secure market leadership, and constraints on supply expansion due to the high level of process complexity.

From November of last year to February of this year, and from March to early July, the KOSPI rose by 52.0% and 29.5%, respectively, with gains led by the semiconductor sector. During the same periods, the semiconductor industry rose by 95.7% and 72.1%, respectively. In contrast, from March to early July, sectors such as defense (-1.1%), shipbuilding (-13.7%), automotive (-22.7%), and nuclear power (-25.3%) showed limited room for further gains.

However, the Bank of Korea noted, “Adjustments in the financial market due to concerns over AI profitability, a reduction in real investment by big tech companies, and energy bottlenecks are downside risks.”

Shin Hyun-song, Governor of the Bank of Korea, is delivering a greeting at the 2nd plenary meeting of the Planning and Finance Committee held at the National Assembly on July 9, 2026. Photo by Hyunmin Kim

This content was produced with the assistance of AI translation services.