Kospi on a roller coaster: FOMC and semiconductor earnings are next week's key watchpoints

South Korean stocks have been swinging sharply in both directions, and the US Federal Open Market Committee meeting is set to be the biggest market variable next week. Analysts say the recent turbulence reflects an unwinding of excess built up since May rather than a shift to a bear market, and expect attention to rotate toward the second-quarter earnings season after the FOMC concludes.

The Kospi closed at 8,123.62 on Friday, up 359.67 points, or 4.63 percent, from the previous session, according to Korea Exchange. For the week running June 8 through June 12, the Kospi fell 0.45 percent while Kosdaq gained 2.65 percent. The index swung violently during the period — dropping 8.29 percent on June 8 before surging 8.18 percent on June 9. Circuit breakers were triggered on every trading day this week except Thursday.

Analysts attributed the turbulence to escalating military tensions between the United States and Iran, a sharp rise in global oil prices, and concerns about higher interest rates. Even so, the brokerage community is not reading the recent pullback as a signal that the market is turning bearish.

"The stated triggers for this correction were war, oil and interest rates, but the real driver was the unwinding of the excessive concentration that built up after May," said Lee Jae-won, a researcher at Yuanta Securities Korea. "Concerns about the AI investment cycle are also hard to read as a sign that the underlying trend has broken." He added that semiconductor exports are running at record highs and earnings forecasts are being revised upward, putting the current environment closer to a post-overheating correction than a recession signal.

Persistent net selling by foreign investors has also amplified volatility. Foreign investors were net sellers of 4.7157 trillion won (about $3.09 billion) worth of Kospi-listed shares and 15 billion won worth of Kosdaq shares this week. Analysts, however, are treating the outflows as technical selling rather than a structural exodus from Korean equities.

"It appears to reflect a combination of fundraising for participation in the SpaceX listing and rebalancing demand driven by South Korea's rising weight in the MSCI Emerging Markets index following the AI rally," said Na Jeong-hwan, a researcher at NH Investment. "Once the large IPO and portfolio adjustments are complete, flows will ultimately return to fundamentals."

The FOMC meeting on June 18 will be the market's top focus next week. A hold on the benchmark interest rate is widely expected, but investors are closely watching the policy message that Fed Chair Kevin Warsh will deliver for the first time since taking office.

Na said some hawkish language is possible given inflation concerns stemming from the recent rebound in oil prices, but added that an extremely hawkish message is unlikely given the trajectory of the trimmed-mean PCE inflation gauge and the core consumer price index that Warsh closely monitors.

Lee Gyeong-min, a researcher at Daishin Securities, said interest-rate noise is unavoidable in an earnings- and fundamentals-driven market but represents an opportunity to add exposure. "Further swings are possible depending on next week's FOMC outcome, but the market is expected to resume its upward trend from that point," he said.

NH Investment set its Kospi forecast range for next week at 7,200 to 8,000, recommending a focus on sectors with strong earnings momentum, particularly semiconductors. The firm expects market attention to shift naturally toward the second-quarter earnings season once the FOMC is behind it.

"Even amid volatile trading, flows will ultimately concentrate in sectors with strong earnings momentum," Na said. "If big-tech second-quarter results come in solid, AI infrastructure investment strategies — covering semiconductors, power equipment, nuclear power plants and energy storage systems — could regain traction." He added that among non-AI sectors, department stores and hotels stand to benefit from premium consumption and inbound tourism and are worth watching.