Korea Still Has Mojo

Research evidence excerpt

Korea Still Has Mojo

Asia Pacific InsightMrules, but we do not discount additional measures if push comes to shove, which we

believe could happen if KOSPI shows signs of breaching 5,000, at this juncture.

• The equity market stabilization fund is a mechanism that has been used in previous

severe market downturns but there has been no official announcements on this by

the government as of now.

Refer to South Korea: Not Much Lower to Go (29 Jul 2026)

Exhibit 4: Capitulation Index

Capitulation Index +1SD -1SD

3.0

2.0

1.0

0.0

-1.0

-2.0

-2.53

-3.0

-4.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Source: Factset, Morgan Stanley Research, Data as of Jul 30, 2026

• The KOSPI’s forward P/E has fallen below 5x, its lowest level (since 2004). Both

chipmakers are trading at around 3.5x forward P/E.

Exhibit 5: KOSPI – forward P/E Trend Exhibit 6: Chipmakers – forward P/E Trend

16 12m Fwd P/E

KOSPI 12M Fwd P/E Historical Avg. +1SD -1SD

14 20 Samsung Elec Sk Hynix

10 14

8 12

6 8

4 6

4 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: WiseFN, Morgan Stanley Research 0

Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25 Oct-25 Nov-25 Dec-25 Jan-26 Feb-26 Mar-26 Apr-26 May-26 Jun-26 Jul-26

Source: WiseFN, Morgan Stanley Research

(2) Where are we in the de-leveraging and de-grossing process? Better

positioned now

We had seen a broadening of products and investor base, which has actively utilized

leveraged ETFs and margin lending, as a double-edged sword. Copious retail liquidity had

been the key driver of the market with the May 27 launch of the single-stock leveraged