The South Korean stock market has experienced a sharp decline, with the Kospi index falling 28% from its peak on June 22 and dropping an additional 4.5% recently. However, Citi's analysts believe that the worst may be over, citing strong economic fundamentals and favorable policy conditions as catalysts for recovery.
They have set a price target of 10,000 for the Kospi, indicating a potential upside of more than 50% from its recent closing price. The analysts attribute the recent downturn to a technical correction driven by profit-taking, particularly among memory chip suppliers, and suggest that this could present a buying opportunity for investors.
The market's volatility has been exacerbated by speculative trading, especially among retail investors who heavily invested in leveraged exchange-traded funds linked to major companies like Samsung Electronics and SK Hynix.
Additionally, the Bank of Korea's recent interest rate hike to 2.75% aims to combat persistent inflation, which is expected to remain above the central bank's target for an extended period. This combination of factors makes the outlook for South Korean equities particularly noteworthy for investors considering market entry or re-entry