The Market That Can't Stop Falling, How Should We Respond to Investments Concentrated in Semiconductors? | Baek Chan-gyu, Yeo Do-eun, Heo Jae-mu

Summary

Center Head Baek Chan-gyu analyzes the sharp decline in the Korean stock market, attributing it to war/oil/inflation concerns, fading policy and earnings momentum, and demand worries. He argues that price correction is largely done, with KOSPI near a statistical bottom, but a sideways period of time correction may persist through August. He favors US equities over Korea due to rate pressures and US economic strength, reaffirms the AI semiconductor cycle is intact, highlights Nvidia’s completed correction, and expresses a positive earnings view on Korean defense and power equipment sectors.

• KOSPI has corrected to near war-era PBR levels; a quantitative model suggests 85%+ probability of a near-term bottom with limited further downside.
• Instead of another leg down, the market is likely to undergo a time correction (sideways consolidation) through August, a chance to rebalance.
• US economic momentum is set to improve in H2, and global interest rate pressures make the US equity market more attractive than emerging markets like Korea.
• The AI semiconductor cycle is not a bubble; massive learning demand will last until 2028-2029, supporting continued growth and investment.
• Nvidia has already undergone sufficient price correction and now faces a period of consolidation rather than further sharp declines.
• Korean defense and power equipment sectors have upcoming positive earnings and offer a directional opportunity outside semiconductors.
• Global liquidity (M2) remains expansive, keeping the underlying support for risk assets intact.
• Investors should avoid chasing whip-saw moves or using aggressive leverage immediately after steep sell-offs.