Morgan Stanley says South Korea stocks are seeing a pullback, not a breakdown

Morgan Stanley says Tuesday’s sharp drop in South Korean shares looks more like a shortterm pause than the start of a deeper slump. The Kospi fell about 10% in the session, its worst day since March and one of its largest declines on record. Analyst Joon Seok said the market was hit harder than peers because it has heavy exposure to memorychip stocks, which sold off during a broader global semiconductor rout. He argued that the basic business outlook for those companies has not changed enough to suggest a lasting deterioration. Seok also pointed to the market’s strong recent run, with the Kospi up more than 62% in the second quarter and nearly 95% in 2026 before the decline. In his view, investors were likely taking profits after a fast rally, while also waiting for more clarity on monetary policy and artificial intelligence demand trends. Morgan Stanley said it still expects volatility in the second half of 2026, but does not see a bear market forming. The firm’s target for the Kospi is 9,000, which would be about 10% above Tuesday’s close.