Kospi at 8,000: 'Avoid leverage, hold cash'

The Kospi has finally broken through the 8,000 mark. A market that was hovering near 2,600 just a year ago has entered an entirely new landscape — one that Koreans are already calling the "8,000 Kospi era." The index surpassed 5,000 at the start of this year, then raced through 6,000 and 7,000 before reaching 8,000 in a matter of months, a pace of ascent without precedent in South Korean market history.

Wherever you go in the market, the conversation keeps coming back to Samsung Electronics and SK Hynix. That is why a joke has been making the rounds: "I sold thinking I'd hit the shoulder, only to find out it was a giraffe's neck."

At the same time, many investors who diversified along the way are left ruing their missed exposure to the explosive rally in market-leading stocks. The gap in sentiment between those who have booked gains and those who have not is growing extreme.

This is the most painful dynamic playing out on the ground. Even investors who normally preach long-term investing, diversification and risk management find themselves rattled by a rally this fast. Impatience and anxiety collide: "Maybe this time really is different" and "Shouldn't I jump in now?"

What is striking, however, is that the market's biggest players are far calmer than one might expect. In moments like this, their moves offer important clues for ordinary investors. What deserves attention right now is not the short-term index number but how the people who move vast pools of capital are actually reading the market.

Why the big players don't flinch — A look at the portfolios of high-net-worth investors in recent months confirms that confidence in AI infrastructure and the semiconductor industry remains strong. The Kospi's surge has naturally lifted their equity weightings, but there is surprisingly little anxiety about not having bought more.

This is one of the defining differences between retail investors and the big players. Wealthy investors do not see a rising market as a chance to get rich quick; they see it as their existing assets growing as expected. Rather than growing anxious watching share prices surge, they stay focused on the direction of their holdings and the structural shifts reshaping industries.

Among wealthy investors, the prevailing view has become: "Why get off a horse that's already running?" Conventional wisdom once held that the right move after a sharp rally was to trim positions and lock in gains through rebalancing. But the dominant judgment in today's market is that the structural growth of AI-centered industries could run longer and stronger than previously anticipated.

In practice, even wealthy investors who previously favored the shipbuilding, defense and nuclear power plant sectors have recently been trimming some of those positions and expanding their semiconductor exposure. The reasoning is that the AI memory chip industry anchored by Samsung Electronics and SK Hynix is not simply riding a business cycle — it sits at the center of a paradigm shift.

Shifts in foreign investor flows are another important factor. South Korean equities were long seen as a market easily rattled by foreign selling, but the narrative is changing: with AI industry growth and improving corporate earnings expectations, a rerating by overseas capital is now being discussed. Anticipation of American depositary receipt issuance and the broader reshaping of global supply chains are also elevating the standing of South Korea's leading chipmakers.

From 'missed out' to 'how do I participate' — Another hallmark of big-money investors is that even when they miss a direct entry point, they do not abandon the market altogether.

In situations where investors might once have walked away muttering "it's already run too far," the active strategy now is to gain indirect exposure through semiconductor exchange-traded funds, AI infrastructure ETFs and global technology ETFs. Rather than absorbing the volatility of individual stocks, the approach is to ride the growth trajectory of an entire industry.

ETF-based investing has become entirely natural among wealthy investors in recent months. ETFs were once seen as a retail investor product, but institutions and high-net-worth individuals now actively use them as a core asset allocation tool.

This shift signals a fundamental change in how the market is viewed. The question is no longer simply "which stock will go up more?" but "which industry will define the next 10 years?"

A similar trend is visible in overseas equities. Where wealthy investors once concentrated on the Magnificent Seven mega-cap technology stocks, the investment universe has recently expanded to encompass the broader AI ecosystem — fiber-optic infrastructure, semiconductor equipment, robots, power equipment and renewable energy.

Notably, wealthy investors tend to prefer gradually adding to positions during pullbacks. This is grounded in experience: stocks tied to the largest hyperscaler cloud companies have rarely sustained corrections deeper than 20% for long. Market volatility is treated not as a source of fear but as an opportunity to build positions.

By contrast, appetite for gold and long-term bonds — both widely popular until recently — has visibly cooled. The reason is straightforward: the market has begun pricing in growth expectations again. With upward pressure on oil prices and inflation not yet fully resolved, the possibility of long-term interest rates rising again is back on the table, which would inevitably reduce the appeal of long-duration bonds.

In practice, even bonds offering annual yields around 4 percent are no longer attracting the strong interest they once did. Wealthy investors instead tend to maintain cash and short-term bond weightings, preserving the liquidity to move aggressively when the market eventually corrects.

Ultimately, the conviction is growing that the most valuable asset in today's market is cash that can move at any moment. This is not simply a conservative posture. It is the capacity to avoid being driven by fear when markets wobble and to seize opportunities instead.

Is Kospi 8,000 a bubble or a new era? — The question being asked most often about the current market is whether it is overheating.

There are genuinely worrying indicators. Margin loan balances have climbed to record highs, and the frenzy around leveraged investment products is intensifying. Daily trading volume and the number of new account openings have both jumped sharply. Many voices warn that after such a rapid surge, profit-taking and the risk of wider volatility deserve serious caution.

Yet there are also clear reasons why this rally cannot be dismissed as a simple liquidity bubble. The advance is built on a concrete earnings foundation: the AI industry. Semiconductors, power equipment, data center infrastructure and robotics are all seeing sharp improvements in actual corporate profits, and global capital is acknowledging this. Global investment banks have raised their targets for South Korean equities well above previous levels, and some overseas investment banks have mentioned the possibility of the Kospi reaching 9,000 to 9,500 this year. Major domestic brokerages have similarly issued elevated outlooks.

Of course, no bull market lasts indefinitely. There is a real possibility that volatility will widen after August or September. A slowdown in export growth and fading base effects also warrant caution. But what matters is not the fact that a correction will come — it is how investors respond when it does. Wealthy investors today view a correction not as a signal of market collapse but as an opportunity to reposition their portfolios.

What portfolios do wealth managers recommend? — The most important consideration in portfolio construction right now is ensuring that customers feel the stability of being in the market. A portfolio that sits entirely on the sidelines during a bull market only amplifies anxiety. But an excessively aggressive posture is not the answer either. The core objective is a structure that participates in the upside while absorbing the shock of a downturn.

The broad contours of current high-net-worth portfolios look roughly like this. About 20 percent is allocated to global growth assets — dollar-denominated holdings through Nasdaq and S&P 500 ETFs, global equities centered on the United States and Japan, and exposure to China's robotics sector.

About 40 percent sits in domestic market leaders — core holdings such as Samsung Electronics, SK Hynix and Hyundai Motor, combined with semiconductor, power equipment, space and financial ETFs to capture earnings momentum.

The remaining 40 percent is in defensive assets — bonds, target-date funds and absolute-return long-short funds that anchor the overall portfolio.

Where total equity weightings were once managed at around 40 percent, many portfolios have now risen to around 60 percent. This is less a matter of aggressively adding exposure than of allowing the natural expansion from rising share prices to stand rather than cutting it back.

There are three rules retail investors should keep in mind.

First, treat leveraged investment with caution. In a bull market, the returns on leveraged products look dazzling. But survival ultimately matters more than speed. When volatility picks up, even a modest pullback can translate into devastating losses.

Second, always hold cash. In a rising market, cash can feel inefficient. But investment success ultimately comes down to whether you have funds available to buy more when an unexpected downturn arrives. Cash is the power to wait — and it is the single most important reason why big players stay steady even during sharp market drops.

Third, rebalance mechanically when target returns are reached. No asset only goes up. The hotter the market, the stronger the temptation to hold on for more. But what truly matters is not the ability to sell at the peak — it is the ability to survive and keep meeting the next opportunity.

AI is no longer a simple investment theme. It has become a sweeping force reshaping entire industries and asset markets. At the same time, it is rapidly changing the value of cash itself.

There is no need to be unduly shaken by the strong returns others around you are posting. What matters is moving beyond the state of simply watching the market from the sidelines without acting.

The big players are not only those who buy at the bottom and sell at the top. Ultimately, the people harvesting gains today are those who, at some point in the past, started doing something despite their fear.

Today's market holds fear and expectation in equal measure. But the history of asset markets has always favored those who prepared. Rather than waiting for the perfect moment, starting small and moving with the market — that may be the most important investment posture to adopt right now.

By Hong Tae-hwa