"Main Cause of Market Plunge Is Not Leveraged ETFs but Concerns Over AI Peak"

Samsung Securities:
"KOSPI Sell-off Pushes Market into Technically Oversold Territory"

On the 13th, the KOSPI index opened at 7,412.03, down 64.91 points from the previous trading day, displayed on the electronic board showing the domestic stock market status in the dealing room of the Hana Bank headquarters in Jung-gu, Seoul. On the same day, the won-dollar exchange rate started trading at 1,499.3 won, down 2.1 won from the previous trading day. July 13, 2026 Photo by Jin-Hyung Kang

There is an analysis that the Korean stock market has plunged excessively compared to its value, entering technically oversold territory. The fundamental cause of the recent sharp decline in the stock market is diagnosed as concerns over an artificial intelligence (AI) investment bubble, rather than supply and demand issues such as single-stock leveraged ETFs.

According to Samsung Securities on July 13, the KOSPI has dropped more than 20% from its peak recorded last month. Since the 2008 financial crisis, there have been five instances where the KOSPI fell more than 20% from its 52-week high. During the temporary global recession caused by the COVID-19 pandemic in 2022, the KOSPI dropped 35% from its peak. Excluding that case, this is the largest drop since September 2011, when the U.S. credit rating downgrade and the European fiscal crisis led to a roughly 26% decline.

The recent decline in Korean stocks is considered unusual, given that other stock markets remain largely stable and global macroeconomic conditions are sound. Seungmin Yoo, a researcher at Samsung Securities, pointed out, "While the market cites geopolitical risks, earnings forecasts that fall short of expectations, and price distortions caused by leveraged ETFs as reasons for the weakness in the Korean market, the key factor is concerns about an 'AI investment bubble.'"

Researcher Yoo explained, "It is concerning that de-rating (decline in valuation) of the price-to-earnings ratios (PER) in stock markets with a high proportion of tech stocks, such as Korea and the United States, has been underway since the beginning of the year," adding, "This is a phenomenon commonly observed in the latter stages of a bull market cycle."

However, he emphasized, "This reflects the market's caution regarding the AI investment bubble, not a deterioration of fundamentals," and noted, "In the end, whether there is an adjustment in corporate earnings will be the key issue."

In this context, Researcher Yoo analyzed that Korea's export data is a critical macro indicator with strong real-time relevance in the global stock market. In particular, he added that whether semiconductor exports increase becomes even more important amid concerns over the peak of AI investment. According to the Korea Customs Service, Korea's semiconductor exports reached a record-high growth rate as of July 10. Accordingly, he assessed that the debate over the peak of AI investment is not yet at the stage of becoming reality.

Researcher Yoo stated, "The recent sharp decline in the Korean stock market is the result of 'forecasting errors' and 'overreactions,'" and assessed, "Technically, the Korean stock market has entered oversold territory." He stressed, "According to internal indicators measuring investor sentiment in the KOSPI market, the KOSPI has been building a typical support line since the end of last week, repeating cycles of panic selling and panic buying."

He further commented, "Externally, there are risk factors such as renewed tensions in the Strait of Hormuz, but the United States and Iran are unlikely to escalate into a full-scale war and will instead seek to gain a negotiating advantage." He added, "In light of the above, it is advisable to maintain a risk-on stance in global asset allocation strategies, and in particular, Korean stocks should be considered as an opportunity to increase holdings following the recent sharp decline."

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