The KOSPI has weakened recently while its divergence from the U.S. semiconductor sector continues to widen, and the buyback-driven demand that previously supported the market is now fading.

The KOSPI recently fell below its major trendline and lost its 100-day moving average. The 200-day moving average is holding for now, but the technical picture has clearly deteriorated. At the same time, the Philadelphia Semiconductor Index (SOX) continues to attract capital inflows, with long positions in U.S. semiconductor stocks steadily climbing. This divergence between the two indices has prompted the market to question whether the KOSPI is pricing in potential risks to the global technology cycle ahead of time.

Liquidity conditions are also unfavorable. The share buyback demand that had been supporting the KOSPI entered a dormant phase several weeks earlier than expected, removing an important source of buying. Elevated oil prices are adding further pressure. South Korea relies almost entirely on imported crude, with oil accounting for more than one-third of primary energy consumption. Rising energy costs are especially sensitive for an economy heavily dependent on manufacturing and exports.

In addition, options positions left over from the earlier extreme volatility regime are still being unwound. The KOSPI had previously priced in intraday swings of roughly 6%, which have now dropped to slightly above 2%. The simultaneous decline in the index and retreat in volatility suggest that accumulated options positions and hedging pressure are still being digested.

Technical Pressure Mounts as Buybacks Retreat and Oil Prices Weigh

The divergence between the KOSPI and the SOX is one of the most notable developments in the current market. U.S. semiconductor stocks remain in favor with investors, while the Korean market has weakened first, reflecting a clear split in capital flows and risk pricing between the two markets.

The exit of buyback funds has further weakened short-term support for the KOSPI. Buyback demand had previously helped offset selling pressure, but with this buying retreating ahead of schedule, the index becomes more vulnerable to trend-following flows after breaking below key moving averages.

Oil prices are another variable that the Korean market cannot afford to ignore. South Korea's dependence on crude imports is extremely high. Rising energy prices not only drive up corporate costs but also pressure the manufacturing sector through terms of trade and profit margins. Therefore, even if U.S. investors have become less sensitive to high oil prices, the Korean market may still face more direct impact.

Goldman Sachs: More Like Position Cleanup Than a Cycle Peak

Despite weakening signals on both the technical and liquidity fronts, Goldman Sachs does not believe this pullback means the semiconductor cycle has peaked. The bank judges that the current situation is closer to a "position-level cleanup" than a structural top.

Goldman Sachs believes forward earnings expectations remain solid, and semiconductor and memory chip fundamentals still have support. The HBM4 capacity ramp-up and equipment supply shortages are expected to persist until the second half of 2028, meaning chip demand driven by AI infrastructure investment could remain strong for an extended period.

At the same time, Korean technology stock valuations are already at levels not seen in decades. Goldman Sachs therefore believes the divergence between the KOSPI and the SOX is more likely a reflection of temporary capital and positioning misalignment rather than a fundamental reversal in the global technology cycle. The bank advises investors to accumulate high-conviction memory and technology leaders selectively during sharp discounts.