"KOSPI Surpassed 9,000, but May Fall Below 5,200 Next Year"...Expert Explains the Forecast

KOSPI May Drop Below 5,200 in the First Half of Next Year
Concerns Over 10-Year U.S. Treasury Yields and AI Semiconductors
"Reduce Stock Exposure and Increase Cash Holdings"

There are forecasts that the KOSPI, which had climbed to the 9,385 level during intraday trading in June, could fall below the 5,200 mark in the first half of next year. Analysts point out that the rise in U.S. Treasury yields, international oil prices, and concerns about the artificial intelligence (AI) semiconductor sector may serve as burdens on the domestic stock market.

KBS's YouTube channel 'Money Olla' released an interview video on September 15 with Kim Youngik, adjunct professor at Sogang University Graduate School of Economics.

Kim Youngik, adjunct professor at Sogang University Graduate School of Economics, projected that the KOSPI index could fall below the 5200 level in the first half of next year. Screenshot from KBS YouTube channel ‘Money Olla’

In the video, Professor Kim assessed recent global financial market trends and predicted the future direction of the KOSPI and the won/dollar exchange rate. He judged the intraday high of 9,385 reached by the KOSPI in June as the peak of the current upward cycle. He explained that the market has since entered a declining phase and, considering typical stock market cycles, such a downward trend could continue for more than a year.

Professor Kim especially noted that, even with the KOSPI slipping to the 5,200 range during intraday trading recently, there is potential for further decline. He commented that the bottom of this downward cycle has not yet been reached, projecting, "In the first half of next year, it could fall even lower."

He identified the yield on U.S. Treasury bonds as one of the key factors. Recently, the 10-year U.S. Treasury yield climbed above 5% during intraday sessions, which can weigh on risk assets like stocks. The price of international crude oil, which has surpassed $106 per barrel, was also cited as a factor increasing uncertainty regarding inflation and interest rate paths. Additionally, the so-called 'AI semiconductor slowdown'—the idea that the growth pace of the AI semiconductor industry may weaken—was highlighted as another risk factor for the stock market.

On the 18th, the dealing room electronic board at the main branch of Hana Bank in Jung-gu displayed the won/dollar exchange rate and KOSPI closing price. Photo by Yonhap News Agency

Professor Kim also mentioned the possibility that investment enthusiasm surrounding AI could result in a stock market bubble. He referred to the example of the late 1990s Nasdaq rally, where high expectations for technology stocks were followed by a sharp decline in the early 2000s. He diagnosed that, similarly, current optimism about AI may be excessively priced into the market. Accordingly, he predicted that the AI-related bubble could begin deflating as early as the fourth quarter of this year.

He therefore argued that investors need to reassess asset allocation. Based on the flow of leading economic indicators, Professor Kim stated it is not yet the right time to increase stock holdings. Instead, he advised reducing the proportion of stocks and increasing holdings in cash-equivalent assets. "I believe the cyclical variation of Statistics Korea's leading economic index peaked in August and has started to decline," he explained.

On the other hand, he suggested the possibility of a stronger won against the dollar. Professor Kim stated, "While the exchange rate may rebound in the short term, a trend toward dropping to the 1,200 won range has begun in the medium term." He cited as grounds the possibility of a decline in the dollar index, China’s potential policy shift toward a stronger yuan, the undervalued yen, the real interest rate gap between Korea and the U.S., and Korea’s current account surplus.

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