According to BlockBeats, on July 19, the global semiconductor sell-off and momentum reversal combined to cause the South Korean KOSPI index to fall nearly 25% from its high on June 22, with a further drop of 8.8% this week. The 12-month forward price-to-earnings ratio fell to 5.78 times as of July 16, lower than the trough of the 2008 global financial crisis and the lowest since 2004.

In its weekly report on July 17, Goldman Sachs, through stress testing, pointed out that even with a 41% reduction in earnings per share (the worst level during the financial crisis), based on a valuation of 13 times earnings at the 2008 EPS low, the KOSPI would still correspond to approximately 8965 points, far higher than current levels, indicating that current valuations exhibit a positive risk-reward skew. Looking at the price-to-book ratio, the forward price-to-book ratio has fallen to 1.43 times, while the forward ROE remains high at around 25%, a rare divergence between the two.

UBS added that excluding Samsung Electronics and SK Hynix, the overall forward P/E ratio of KOSPI is 8.79, still below its historical average. Foreign investment trends have shown a marginal shift: this week, foreign investors turned to net buying of approximately 19 billion won, mainly flowing into the automotive and retail sectors, but the technology sector still saw net selling of approximately 76.6 billion won; the won appreciated 1.2% against the US dollar this week. However, Goldman Sachs' Korea Equity Risk Barometer reading is -2.7, still in a deep risk-averse zone.

On the regulatory front, the South Korean government has introduced a series of new regulations for single-stock leveraged ETFs: starting August 5th, the cash margin requirement has been increased from approximately 3 million won to 30 million won; starting August 19th, alternative collateral is prohibited; new product listings are suspended and the marketing of existing products is immediately banned; and the minimum trading unit is planned to be raised from 1 unit to 20 units in November. UBS believes that the 30 million won all-cash margin requirement will significantly reduce retail participation, but the market has already completed some deleveraging—the total size of single-stock leveraged ETFs has decreased from its peak of approximately 2.4 trillion won on June 25th to approximately 1.7 trillion won.

Goldman Sachs points out that although the balance of margin trading and securities lending has decreased from a peak of 38 trillion won to 33 trillion won, the balance of deposits held by South Korean investors has risen to 110 trillion won, and the ratio of margin trading to deposits has decreased significantly, indicating that the overall systemic risk of leverage is limited. Strategically, Goldman Sachs maintains its target price of 12,000 points and recommends buying on dips, while UBS maintains its target price of 9,200 points and has shifted to a barbell strategy, adding defensive sectors such as consumer goods, healthcare, and construction, while removing cyclical and growth sectors that have seen significant gains. Both institutions agree that South Korean stock valuations are at historically low levels, but they hold different approaches to short-term volatility and the uncertainty of AI demand.

According to BlockBeats, on July 19th, the South Korean Ministry of Strategy and Finance, together with the Financial Services Commission, the Bank of Korea, and the Financial Supervisory Service, officially released the "Roadmap for the Internationalization of the Korean Won." The goal is to transform the Korean won from a controlled currency into a "freely convertible currency," achieving a trading environment unrestricted by time and location. Key measures include: building upon the existing 24-hour operation of the foreign exchange market, the Bank of Korea will construct an "offshore won payment network." After overseas financial institutions register as offshore settlement institutions, foreigners can complete deposits, remittances, and payments without opening a Korean account; significantly reducing the pre-reporting obligation for won capital transactions between foreign investors; drastically relaxing foreign exchange controls, doubling the reporting threshold for won loans and capital transactions by foreigners, and transitioning to a post-reporting system in the long term; and unifying and simplifying won accounts to improve ease of use. In the digital finance sector, the South Korean government will formulate rules for the issuance and circulation of won stablecoins based on the "Basic Law on Digital Assets," promote CBDC and government bond tokenization demonstration projects by South Korean banking institutions, and participate in the Agora project led by the Bank for International Settlements to seize the digital international settlement market.

In terms of supporting measures, the government will promote the inclusion of the Korean won in the MSCI Developed Countries Index, expand the scope of collateral for government bonds and currency-stabilized bonds, allow foreign-to-foreign government bond lending transactions within international central securities depositories, and enhance securities access for foreign investors. On the trade front, preferential policy-based financial interest rates and expanded trade insurance limits will be provided to companies settling in Korean won. The system of direct transactions in local currencies with major trading partners will be expanded, cross-border QR payment interconnection and the Asian Multilateral Payment Network (Project Nexus) will be promoted, and a Korean won settlement channel bypassing the US dollar will be established. Regarding liquidity, a private overnight Korean won supply mechanism will be established, with the government and central bank providing support when necessary. Restrictions on Korean won financing by foreign financial institutions will be relaxed simultaneously, and domestic bank custody services will be institutionalized. The government stated that the internationalization of the Korean won will promote capital market development, reduce corporate foreign exchange hedging costs, and enhance foreign exchange market stability, but it will also upgrade foreign exchange stability policies and the macro-prudential management system to address volatility risks.