South Korea's main equity gauge weakened sharply last week, slipping 3.8% as foreign investors stepped up selling pressure and the market's 12-month forward price-to-earnings multiple dropped to levels not seen since the Global Financial Crisis, Goldman Sachs said in a recent analyst note.
Net foreign disposals of KOSPI-listed stock totaled 19.87 billion Korean won in the week ended July 3, with most of the outflows coming from technology shares. On a year-to-date basis, foreigners have been net sellers of 157.50 billion won on the KOSPI.
Domestic players offset some of the overseas exit. Local institutions and retail investors recorded net purchases of 8.16 billion won and 11.12 billion won respectively, partially counterbalancing the foreign net selling.
Performance across sectors was uneven. The Banking, Securities and Leisure sectors outperformed the broader market during the week, while Technology, Insurance and Retail lagged, falling 7.6%, 5.7% and 5.7% respectively relative to the index.
Despite the price declines, analysts observed an upward movement in earnings expectations. Goldman Sachs reported a 4.8% upward revision to KOSPI 12-month forward earnings per share, with Leisure recording the strongest upward revision and Chemicals registering the largest downgrade among sectors.
To assess downside risk, Goldman Sachs ran a stress-test scenario. That exercise assumed a 33% reduction in earnings - a downgrade consistent with the median drawdown across six prior market troughs since 2008 - and applied the median forward P/E at historical earnings-bottoms of 11.4 times. Under those assumptions, the bank calculated an illustrative KOSPI level of 8,750. That figure was derived by applying the 11.4x trough multiple to earnings of 771, which the note said is the result of cutting current consensus next-twelve-months EPS of 1,150 by 33%.
Market risk indicators moved in tandem with the price action. The Korea Equity Risk Barometer, tracked as the GSSRKERB Index, declined to -1.5, a level the analysts described as "risk-adverse territory." The research team added that the barometer functions as a contrarian signal under conditions where large market moves have already occurred and that it points toward more constructive equity returns on a forward-looking basis.
Technical measures also softened. The KOSPI's Relative Strength Index dropped to its weakest reading since the end of March 2026, and the index breached its 50-day moving average during the week.
Currency and fixed-income moves accompanied the equity declines. The Korean won strengthened 0.3% against the U.S. dollar over the week but weakened 0.2% versus both the Japanese yen and the euro. On the sovereign curve, the three-year Korea Treasury bond yield rose to 3.75% and the 10-year yield climbed to 4.20%.
Broadly, MSCI Korea fell 5.5% over the week and now trades at a 55% discount to the MSCI AC World index on a forward P/E basis.