Morgan Stanley upgraded South Korean equities to overweight, targeting a KOSPI of 9,000 (36% upside) and saying the leveraged ETF and margin unwind is past its midpoint while forecasting a near-term KOSPI range of 5,500 to 10,500 and citing Samsung Electronics and SK Hynix as valuation supports. Despite that bullish call, the KOSPI fell 4.41% to 6,304.80 on Monday after a more than 30% drop from its June peak, with Samsung down 7.43% to 243,000 won and SK Hynix down 7.51% to 1,589,000 won, creating volatility that could spill into broader markets including crypto and DeFi liquidity and investor risk appetite.

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In Brief

Morgan Stanley upgraded South Korean stocks to overweight with a 9,000 KOSPI target.
Strategists called the selloff technical, saying the leverage unwind is past its midpoint.
KOSPI fell 4.41% Monday as Samsung and SK Hynix dropped over 7%.

South Korea’s “leverage washout” has created a fresh entry point into the AI trade, according to Morgan Stanley, which lifted its rating on the country’s equities to overweight. The bank now sees the KOSPI climbing 36% to its 9,000 target.

Strategists led by Daniel K Blake described the selloff as mainly technical. The bank previously rated the country as an equal weight.

Samsung and SK Hynix Underpin Morgan Stanley’s KOSPI Call

The KOSPI has exhibited notable volatility. The index tumbled more than 30% from its June peak. A boom in single-stock leveraged exchange-traded funds and concentrated index weightings deepened the rout.

However, according to the analysts,

“We are past the midpoint of unwinding leveraged ETFs, hedge fund leverage, and retail margin.”

Morgan Stanley sees the index trading in a near-term range of 5,500 to 10,500. It expects Samsung Electronics and SK Hynix to provide valuation support, with tailwinds for industrials, defense, and financials.

The bank also upgraded Thai equities to overweight, citing cheap valuations, AI capex, and energy security themes. Meanwhile, it cut Australia to underweight, seeing limited upside after rate hikes and property tax reforms.

AI Stocks Whipsaw as KOSPI Extends Losses

Meanwhile, this comes as Korean stocks swing down again. The KOSPI posted a sharp 18% rally on Friday before reversing on Monday.

At press time on Monday, the KOSPI traded at 6,304.80, down 4.41%, or 290.65 points, from Friday’s close of 6,595.45. Samsung Electronics fell 7.43% to 243,000 won, while SK Hynix dropped 7.51% to 1,589,000 won.

KOSPI Index Performance. Source: Google Finance

The weakness spread to Japan. The Nikkei 225 slipped 2.09% to 63,018.33, with chip equipment makers Advantest and Tokyo Electron down 2.86% and 2.34%.

However, US stock futures moved in the opposite direction. They rose modestly after President Donald Trump said he had canceled planned strikes on Iran.

BREAKING: US stock market futures rise after President Trump calls off strikes on Iran and says a deal is near:1. S&P 500: +0.5%2. Nasdaq 100: +0.8%3. Dow Jones: +0.4%4. WTI Crude: -7.5%5. Brent: -10.0%6. Gold: +0.7%Peace deal headlines are back.
— The Kobeissi Letter (@KobeissiLetter) August 2, 2026