KOSPI Crashes 44% From June Peak but Nomura Targets 109% Upside on Corporate Buybacks and AI Recovery

The Quick Take

• South Korea's KOSPI index has dropped 44% from its June 2026 peak amid global AI growth concerns and heavy foreign fund outflows, entering deep bear market territory
• Despite the sharp selloff, Nomura projects up to 109% upside for the KOSPI from current levels, setting a target of 10,000-11,000 driven by corporate buybacks, AI earnings recovery, and governance reforms
• The KOSPI crash reflects concentrated exposure to AI hardware and semiconductor stocks that have been hit hardest by SK Hynix's earnings miss and broader AI spending concerns

South Korea's KOSPI index has plunged 44% from its June 2026 peak, entering bear market territory amid a confluence of headwinds including global concerns about the pace of AI infrastructure investment, significant foreign fund outflows from Korean equities, and the direct impact of SK Hynix's disappointing earnings results. The selloff has been among the most severe in recent history for the Korean market and has triggered circuit breaker trading halts as automatic market protection mechanisms activated in response to the speed and scale of the decline.

Against the backdrop of extreme selling, investment bank Nomura has taken a sharply contrarian view, projecting up to 109% upside for the KOSPI from current depressed levels and setting a target range of 10,000 to 11,000 on the index. The bullish thesis rests on several pillars: corporate share buyback programs that have been announced by Korean conglomerates as part of ongoing governance reform initiatives, an expected recovery in AI earnings for Korean semiconductor and display companies once the current demand adjustment cycle runs its course, and structural valuation improvements stemming from the Korea discount reduction program.

The Korea discount, a well-documented phenomenon where Korean stocks trade at significant valuation discounts to global peers due to complex ownership structures, cross-shareholding, and governance concerns, has been the target of government-led reform efforts. Progress on these reforms has been identified by Nomura as a key catalyst for multiple expansion even before the earnings recovery scenario plays out. For international investors with a longer time horizon, the 44% correction has created a scenario where quality Korean companies are trading at historically cheap valuations, though the near-term uncertainty around AI spending trajectories and foreign fund positioning makes the entry timing a key challenge.

Synthesized from 1 source.