Korean stocks plunge 5% in a single day! Morgan Stanley cuts its bearish target to 6,000 points, while Goldman Sachs and Moody’s also turn cautious

July 20: South Korean stocks open sharply lower; the KOSPI index’s half-day drop widens to 5%. SK hynix and Samsung Electronics lead the decline. On the same day, Morgan Stanley, Citigroup, Goldman Sachs, and Moody’s all issued bearish reports.
(Background recap: South Korea’s stock market plunges more than 8% in a single day! KOSPI triggers its seventh circuit breaker of the year. SK hynix falls 13%.)
(Additional context: Morgan Stanley cuts its target for Korean stocks’ KOSPI—bearish goal of 6,000 points. After leveraged ETFs drove the rally, the market looks worn out in trading.)

Table of contents

Toggle

• Sell-off immediately at the open: KOSPI down more than 5% in half a day
• The three major banks speak on the same day: Morgan Stanley, Citigroup, and Goldman Sachs all turn bearish
• Moody’s: Second-quarter economic growth may slow to 0.9%
• SK hynix chairman’s take: Next year AI chip demand to surge 100%
• Taiwan perspective: What does the Korean stock pullback imply?

Sell-off immediately at the open: KOSPI down more than 5% in half a day

July 20: Korean stocks show a wave of selling pressure right at the open. On Monday, the KOSPI index opened down 283.95 points, a decline of 4.16%, to 6,536.65 points. Semiconductor bellwethers led the early plunge first—Samsung Electronics and SK hynix both fell more than 5% at the open. During the session, the KOSPI briefly fell below 6,500 points, down as much as 4.72%. The Korea Exchange even activated the sidecar mechanism, pausing program trading for 5 minutes. By midday, the KOSPI’s decline had widened to 5%, with SK hynix down more than 5% and Samsung Electronics down more than 4%.

The three major banks speak on the same day: Morgan Stanley, Citigroup, and Goldman Sachs all turn bearish

It’s not just the market numbers—multiple international institutions issued bearish notes on the same day.

Morgan Stanley lowered its bearish scenario target for the Korea Composite Stock Price Index (KOSPI) from 6,500 to 6,000 points, saying the strong rally earlier this year driven by leveraged ETFs showed “fatigue in trading,” leading many investors to panic.

Citigroup also cut its rating on the Korean stock market to “neutral,” citing increased volatility in market trading conditions.

Goldman Sachs analysts, in a one-page research report, said that the gains Korean residents receive from rising local stocks may only modestly support consumption. The report estimates that this year residents’ stock wealth growth could support consumption growth by about 0.3% of GDP, but as South Korea’s central bank restarts its rate-hike cycle, part of the upside may be offset by higher debt-servicing costs. In addition, the volatility of stock market returns and the recent pullback may lead residents to view their gains as temporary, further limiting the transmission of wealth effects.

Moody’s: Second-quarter economic growth may slow to 0.9%

Along with the Korean stocks, the broader economic outlook also weakened. Moody’s Analytics, in a one-page report, said South Korea’s second-quarter economic growth rate may slow from 1.8% in the first quarter to 0.9%. The report emphasized that, as booming semiconductor exports driven by AI reassert their role, exports will again become the main engine for growth. However, domestic demand in South Korea remains soft: consumption has only slightly improved, high energy costs continue to aggravate inflation pressure, and government measures can only partially ease it.

South Korea’s initial estimate for second-quarter GDP will be officially released on July 23 (Thursday).

SK hynix chairman’s take: Next year AI chip demand to surge 100%

On the same day that Korean stocks fell, SK Group chairman Choi Tae-won revealed at the Jeju Forum that global AI chip demand next year will surge 60% to 100%, and overall semiconductor product demand will also rise 50% to 60%. But he also warned that the amount of new supply “is almost zero,” and the global supply-demand situation for memory chips has already become close to “chaos.” Choi said SK hynix is also scouting locations for chip-factory sites in the United States, aiming to boost supply capacity and curb the price level he described as “abnormally elevated.”

Taiwan perspective: What does the Korean stock pullback imply?

South Korea’s semiconductor industry accounts for about 15% of GDP and overlaps highly with Taiwan. KOSPI saw a dramatic one-day plunge of more than 8% on July 13, triggering the seventh circuit breaker of the year. At that time, SK hynix was down as much as 13%. This half-day decline of 5% did not trigger a circuit breaker, but combined with the same-day rating or target cuts from the three major banks, it suggests Korean stocks are moving from the “peak phase driven by leveraged ETFs” into a digestion stage. Taiwan’s weighted index also pulled back in tandem this week’s Monday. Investors may watch for spillover effects to Asia’s semiconductor sector.