The Kospi index fell more than 5% on Wednesday, leaving it about 20% below its June 19 record high.
“The correction has been driven more by positioning than by a deterioration in fundamentals,” said Jung In Yun, founder of Fibonacci Asset Management Global.
South Korea's stock market, once considered the hottest in the world, has now entered bear territory, highlighting how investors have soured on artificial intelligence investments.
The decline of the Kospi is also tied to concentration risks: chipmakers Samsung Electronics and SK Hynix accounted for more than half of the Kospi's weighting.
“The market is questioning the pace of earnings growth rather than the sustainability of AI demand itself,” added Jung.
The Kospi is still up more than 70% this year, having gained over 75% last year.
“While volatility may persist, I believe the medium-term outlook remains constructive,” added Jung.
