Are KOSPI and SOX in a bubble? Citi answers

Investing.com -- Citi told clients in a note on Friday that investor attention around asset bubbles has moved away from U.S. large-cap benchmarks and toward chipmakers and South Korean stocks.

"Bubble focus has shifted away from SPX to semis and Korea," Citi analysts wrote.

The bank has argued for some time that U.S. equities are in a bubble while maintaining a constructive stance, saying such conditions can persist.

Citi manages that risk tactically through its "Generals indicator," which it said has not triggered a warning sign. The bank also noted that the Nasdaq 100 has not seen a blow-off rally comparable to the fourth quarter of 1999, when the index rose 54% in a single quarter.

Semiconductors and the Kospi, which Citi noted are heavily weighted toward the sector, are a different case.

The SOX index rose 88% in the second quarter of 2026, an all-time record and above the previous high of 68% in the first quarter of 2000.

The Kospi gained 84% over the same period, also a record, against a 29% move in the fourth quarter of 1999. Citi noted the prior record came in the fourth quarter of 1998, at 83%, as markets exited the Asian crisis.

Applying its methodology, which requires an asset to rise more than two standard deviations above trend in real terms, Citi said the trigger has been met.

"For SOX, the bubble condition has triggered," the analysts wrote, adding that it was met in April.

“The two previous episodes that show up are in 2000 and 2020. In those two examples, entering the bubble was not really a problem, but exiting was,” wrote the bank. “The SOX lost 43% and 23% respectively of the gains that were made during the bubble by the time it exited the bubble and continued to sell off for the year after.”

The firm concluded that, given the SOX has not yet exited, “this suggests that the bubble methodology itself does not give a meaningful warning signal at this stage.”

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