Goldman Sachs: AI spending boost cannot offset selling pressure in South Korean stocks, leveraged ETF size has halved from its peak

BlockBeats news, on July 27, Goldman Sachs pointed out in its latest Korea Market Weekly Report that although foreign investors have been continuously buying KOSPI recently, and Alphabet's upgraded AI capital expenditure expectations continue to strengthen the semiconductor demand narrative, the Korea Composite Stock Price Index still fell by about 2% last week. By sector, construction, software, and telecommunications showed relative resilience, while securities, automotive, and insurance were among the biggest decliners.

On the market side, the KOSPI further widened its decline on July 24, closing down 5.72% at 6,690.62 points, having briefly touched 6,650.41 points during trading. Programmatic trading was also temporarily halted. Yonhap News Agency reported that escalating tensions in the Middle East suppressed risk appetite. On that day, foreign investors and institutions sold a net total of approximately 5.2 trillion won, while retail investors were net buyers of about 5.18 trillion won.

Goldman Sachs believes that the return of foreign capital is mainly focused on the tech sector, but the Korean market still faces significant medium-term capital outflow pressure, and foreign holdings in the semiconductor sector are near historical lows. At the same time, KOSPI’s expected EPS for the next 12 months has been revised down by 0.4%, with the automotive sector facing the greatest pressure for earnings forecast adjustments.

Leverage is also cooling. The report shows that Korean retail financing balances have fallen from a peak of $25 billion to $22 billion, and the size of leveraged ETFs has dropped from $53 billion to $26 billion. For the Korean stock market, AI capital expenditure remains a main supporting theme, but with downward revisions to profit expectations, light foreign holdings, and volatile risk appetite, short-term index volatility may continue to expand.