According to Morgan Stanley, the Kospi index has staged a relatively sound recovery as of mid-August, with the upward momentum now extending beyond semiconductor stocks and market risks easing, though near-term volatility cannot be ruled out. The benchmark has climbed back to around the 7,000-point level, yet it still trails the firm's 9,000-point target. Strategists, including Joon Seok and Heewon Choi, noted in a report that they anticipate a gradual recovery for the Kospi rather than a V-shaped reversal.

They highlighted that a broader range of sectors, beyond chipmakers and their related names, are beginning to contribute to the rally, which lends additional support to the market. These sectors include defense, healthcare, construction, and telecommunications. The report also indicated that domestic retail trading activity is expected to remain subdued in the short term, as South Korean individual investors are once again shifting their attention to overseas markets, while foreign capital flows will continue to serve as the crucial driver of market liquidity.

While the improved breadth of the rally and reduced risk levels are positive signals, the strategists cautioned that the path forward may still be bumpy, and the market's dependence on external fund flows underscores lingering vulnerabilities.