KOSPI Forecast to Drop Below 5,200 in H1 2026
South Korean equities face a projected decline below 5,200 points in the first half of next year. Advisors urge investors to shift allocations toward cash assets.
The KOSPI index is expected to fall below the 5,200 level in the first half of next year. This projection comes from a recent assessment of global financial trends. The current market position sits near the 5,200 intraday level. Analysts believe the bottom has not yet been reached.
Kim Young-ik, an adjunct professor at Sogang University, identified June as the peak of the recent rally. He stated that the index hit an intraday high of 9,385 before entering a downtrend. Historical patterns suggest such downtrends last more than one year. US-driven headwinds may accelerate this decline.
Global Headwinds Pressure Risk Assets
The US 10-year Treasury yield reached 5% intraday. International oil prices surpassed 106 dollars per barrel. These factors increase pressure on global risk assets. The slowdown in AI semiconductor growth adds to the bearish outlook.
Concerns over an AI investment bubble are rising. Kim noted that current prices may reflect excessive expectations. He predicts the bubble could deflate by the fourth quarter of this year. Historical examples show sharp declines after tech stock peaks.
Leading Index Signals Asset Shift
South Korea's leading economic index began declining after an August peak. This indicator serves as a key benchmark for allocation. Advisors recommend reducing equity exposure now. Increasing cash-like assets is the preferred strategy in this phase.
Previously, rising leading index values supported aggressive equity positioning. The current downward trend reverses that recommendation. Investors should prioritize liquidity over market exposure. This shift aligns with the broader macroeconomic forecast.
Won Strength Affects Exporters
The won-dollar exchange rate is projected to move toward 1,200 won. It recently fell from 1,550 to 1,340 won. Factors include a weaker dollar and stronger yuan policy. Korea's current account surplus supports this trend.
A stronger won pressures exporters like Samsung Electronics and SK Hynix. Their won-denominated earnings may face downward adjustment. However, lower import prices help stabilize domestic inflation. This creates a mixed economic impact for the country. The source GN auto markets/forex exchange rate data supports this outlook.
