Morgan Stanley Maintains KOSPI Bull Target at 10,500 — Semiconductor Fundamentals Hold Despite 10% Drop

The Quick Take

• Morgan Stanley maintained its bullish KOSPI scenario target at 10,500 points, characterising the recent 10% index drop as a breathing pause rather than a market breakdown.
• AI and semiconductor sector fundamentals remain solid despite the correction, with supply bottlenecks persisting in key memory and AI infrastructure components.
• National Pension Service rebalancing is assessed as having limited market impact — smaller in scale than the 150 trillion won already sold by foreign investors.

Morgan Stanley's equity research team published a note titled 'Shaken but Not Broken' following the KOSPI's sharp 10% single-day correction, maintaining the firm's base-case target of 9,000 and bullish scenario target of 10,500 — a level implying meaningful upside from post-correction readings. The brokerage attributed the correction to Micron share weakness, policy uncertainty, and monetary tightening concerns, but argued that memory semiconductor and AI infrastructure fundamentals remain structurally intact. Supply constraints in key components persist despite the short-term price action, supporting the thesis that the correction reflects investor fatigue after a 26% KOSPI surge in the prior month rather than a fundamental change in the earnings outlook for Korean tech leaders.

The National Pension Service rebalancing concern — which had dominated domestic investor discourse — was assessed as limited in market impact by senior analysts. Even if the NPS reduces domestic equity exposure for rebalancing purposes, the scale of potential selling is estimated to be materially smaller than the 150 trillion won already sold by foreign investors, suggesting the pension fund is not the marginal price-setter for the Korean market. The KOSPI's rally from 4,000 to 9,000 has been driven primarily by domestic retail investor inflows, and those investors' commitment to staying invested rather than following NPS moves will determine whether the current level holds.

The critical signal to watch is whether the KOSPI holds above its post-surge consolidation support level, which Morgan Stanley identifies as necessary for the bull scenario to remain intact. Second-half volatility is expected to increase, per the brokerage's existing view — a warning that while the structural thesis holds, tactical positioning should account for continued price swings. The macro variable is the AI capital expenditure cycle: sustained hyperscaler investment in AI infrastructure globally underpins Samsung Electronics and SK Hynix earnings, and any reduction in data-centre spend commitments from major tech buyers would undermine the entire semiconductor thesis supporting the KOSPI bull target.

Synthesized from 3 sources.