Shinhan Securities researcher Kim Hyo-jin issued a report on July 14 analyzing the recent KOSPI decline and potential resistance from single-stock leveraged ETF investors during any market rebound. Kim stated the recent KOSPI standalone plunge was excessive, but cautioned that Fed rate hike concerns and selling pressure during rebounds would likely produce gradual recovery rather than sharp gains. The KOSPI fell approximately 25% over six weeks from its early June record high, with intraday declines approaching 30% — a magnitude of correction that Kim noted represents decoupling from global market trends and historically occurs only during extreme domestic systemic crises such as currency crises or credit bubble collapses, none of which apply to Korea's current economic situation.
Shinhan Securities Identifies 4.3 Trillion Won Leveraged ETF Resistance at KOSPI 8,200-8,400
Kim identified single-stock leveraged ETF investor selling as a key factor constraining upward index recovery. According to Shinhan Securities estimates, the KOSPI 8,200 to 8,400 range contains the heaviest concentration of investor holdings, with approximately 4.3 trillion won in leveraged ETF purchase volume clustered in this zone. The 8,400 to 9,000 range above also contains substantial selling inventory.
On an underlying asset basis, SK Hynix shows dense buying volume around the 2.2 million won level, while Samsung Electronics has concentrated holdings at both the 290,000 won and 360,000 won levels. Kim stated that as the index rebounds and enters these price zones, breakeven psychology among investors seeking to recover losses and exit positions will likely trigger selling pressure.
Fed Rate Hike Concerns and Oil Volatility Extend Macro Pressure
Kim cited Federal Reserve rate hike concerns as an additional factor supporting gradual rather than sharp index recovery. He noted that oil price volatility stemming from Middle East instability could stimulate Fed rate hike concerns and prolong the macro burden characteristic of early rate hike cycles.
Kim added that empirically, equity prices tend to decline during the initial phase of U.S. rate hikes (first one to two increases), but subsequently rise even amid additional rate increases.
Kim Rules Out Systemic Crisis Behind KOSPI 30% Decline
Kim diagnosed the recent KOSPI plunge as closer to a Korea-specific decoupling phenomenon. He pointed out that historically, cases where an index fell more than 30% were limited to instances accompanied by extreme endogenous systemic crises.
Kim stated that instances where a specific emerging market alone plunged more than 30% independent of global trends occurred only when accompanied by extreme endogenous systemic crises such as currency crises, geopolitical isolation, or domestic credit bubble collapses — none of which apply to Korea's current economy. Based on this assessment, Kim projected the KOSPI would attempt gradual recovery rather than a short-term V-shaped rebound.
FAQ
What price levels does Shinhan Securities identify as key resistance for the KOSPI?
Shinhan Securities estimates the KOSPI 8,200 to 8,400 range contains approximately 4.3 trillion won in concentrated leveraged ETF holdings, representing the heaviest selling resistance zone. For underlying assets, SK Hynix shows resistance around 2.2 million won, while Samsung Electronics has clusters at 290,000 won and 360,000 won.
Why does Shinhan Securities rule out a systemic crisis in Korea despite the 30% KOSPI decline?
Researcher Kim Hyo-jin stated that historically, 30%+ declines in a specific emerging market independent of global trends occurred only during extreme endogenous systemic crises such as currency crises, geopolitical isolation, or credit bubble collapses. Kim assessed that Korea's current economy does not fit any of these categories.
