The Korea Composite Stock Price Index (KOSPI) has reversed from its recent sharp selloff and re-entered a bull market, surging more than 20% from its recent low, meeting the widely accepted threshold for a bull market.

On July 28, 2026, after the Seoul stock market closed, a man watched a screen displaying the KOSPI's movements. Asian markets faced another black day on July 28, with the technology sector taking a heavy hit as the KOSPI plunged nearly 11%. The decline was fueled by reports of a technological breakthrough in China's chip industry, which intensified concerns about the sustainability of the AI boom cycle.

A wave of capital has poured back into the country's heavyweight semiconductor giants, driving the KOSPI from its recent crash and back into bull market territory. Last month, index fell into a bear market due to the liquidation of leveraged positions and forced selling. Now, the benchmark index has rebounded more than 20% from its July low, the internationally recognized threshold for a bull market.

The speed of this reversal highlights the extreme volatility of tech stocks, while raising a critical question: how much further can the Korean stock market's rally go?

For the bulls, the answer largely depends on whether the fundamentals of South Korea's top semiconductor companies can match the market's growing optimism. Strong earnings reports from U.S. tech companies, combined with continued global investment in AI infrastructure, have boosted investor confidence, leading many to believe that demand for memory chips will remain robust.

Peter Kim, head of global investment strategy at KB Securities, said, "During the market downturn, the AI supply chain story and robust earnings didn't fundamentally change. Therefore, this recovery is a return to normalcy driven by fundamentals, not just pure sentiment-driven speculation."

Kim noted that during the previous semiconductor sector crash, corporate valuations and earnings expectations were not seriously questioned. The decline was primarily driven by technical factors and fund flows. With regulators tightening related rules and brokerages optimizing margin and risk control standards, the pressure from concentrated leveraged position liquidation has eased. The current market foundation may be more stable than during the rally phase before the crash.

High Concentration: Risk or Opportunity?

The KOSPI's heavy reliance on a handful of semiconductor companies means the current bull market is highly vulnerable to swings in AI market sentiment. Philip Wool, head of research at Rayliant Global Advisors, said, "At this stage, the Korean stock market is essentially a trade on the AI hardware theme."

Wool analyzed that the current rebound has a technical recovery component: forced selling has subsided, bargain hunters have returned, and fear of missing out is spreading. Meanwhile, better-than-expected earnings from major overseas tech companies have reinforced the view that AI infrastructure spending will continue, leading to upward revisions in earnings expectations for Korean hardware makers.

"If the logic supporting the rally is challenged—whether by cloud giants lowering their capital expenditure guidance, a weakening in computing token prices, or concerns that the Federal Reserve might restart tightening—the market could see a pullback. As long as uncertainty remains about the final scale of AI hardware deployment, high market volatility will persist."

Billy Leung, investment strategist at Global X ETFs, offered a bullish argument: South Korea's push for corporate governance reform and its "Corporate Value-Up Program" is gradually eliminating the long-standing "Korea Discount," a historical phenomenon where Korean-listed companies trade at persistently lower valuations than their global peers.

"The KOSPI has indeed entered a bull market, but the more critical question is whether this rally is driven by speculative trading or genuine fundamental improvement," Leung said.

He assessed that the current trend is more of a fundamentals-driven bull market than a speculative bubble, with semiconductor earnings expectations still being revised upward. However, rising retail trading activity, high industrial concentration in the index, and widespread upward target price revisions are beginning to show signs of a late-stage bull market.

Other industry insiders cautioned against overinterpreting the technical milestone of a 20% rebound. Yoon Jung-in of Fibonacci Global Asset Management said, "This rally should not be characterized as the start of a brand new major bull market." The recovery is partly a technical rebound after forced selling and partly a sign that the market is truly stabilizing.

His base case scenario is that the overall upward trend will continue, supported by improving semiconductor earnings and a recovery in risk appetite, but the pace of gains will slow and volatility will increase. "After such a rapid rebound, a period of consolidation is a healthy adjustment. Investors should not expect the index to maintain its previous pace of gains."