Chasing gains draws caution as KOSPI rally accelerates

Jan 08, 2026, 08:08 am

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The KOSPI closing price is displayed at the Korea Exchange in Yeouido, Seoul, on Jan. 7. The benchmark index ended the session at 4,551.06, up from the previous trading day. / Yonhap

As the KOSPI continues to set record highs early in the year, caution is growing in and out of the market over the pace of gains, with concerns mounting about overheating and rising leverage from margin trading.

The benchmark index closed Wednesday up 0.57% at 4,551.06, according to the Korea Exchange. Liquidity indicators are also climbing. Data from the Korea Financial Investment Association showed that as of Jan. 6, investor deposits totaled 88.63 trillion won, while outstanding margin loans reached 27.8 trillion won, signaling expanding leverage.

Brokerages remain optimistic. Korea Investment & Securities raised its KOSPI target to 5,650 from 4,600, citing improvements in 12-month forward earnings per share and applying a price-to-earnings ratio of 13. Yuanta Securities also lifted its outlook, projecting an upper bound of up to 6,000 points based on upgraded net profit estimates of 427 trillion won.

Still, analysts warn that a sharp rise without moderation could amplify volatility. The index has gained momentum since the start of the year, and a string of upward target revisions has fueled expectations faster than fundamentals can adjust.

Attention has also turned to market alert mechanisms. Exchange disclosures note that stocks can be flagged for investment warnings if they rise more than 60% over five trading days, hit the highest closing price over the past 15 days, or outperform the index by more than fivefold. Such designations can trigger restrictions, including limits on margin buying for overheated names.

Market participants say the speed of the rally may be a greater risk signal than the absolute index level. Even with earnings upgrades, an influx of leveraged funds during a rapid upswing can magnify losses during corrections. Warnings are growing that momentum-driven buying could backfire, particularly if first-half expectations—such as rate cuts or policy support—collide with second-half realities like earnings recalibration or fading policy momentum.

“The market has become extremely sensitive, and even small negative headlines could lead to heightened volatility,” said Park Hee-chan. Kim Hak-kyun echoed the need for caution, noting that inflation pressures and shifts in interest-rate policy could become key variables for the index.

#KOSPI #stock market rally #margin trading #credit balance