Should you buy the dip in KOSPI? Strategist weighs in

Investing.com -- Heightened volatility continues to weigh on investor sentiment, but KB Securities says its core view on the correction and recovery path for the KOSPI remains intact.

According to the firm, markets rarely snap back in a straight line after major declines, with evidence showing that “W-shaped recoveries dominate” following drops of more than 15 percent in a week.

KB Securities strategist Euntaek Lee writes that “markets tend to form a W-shaped recovery rather than a V-shaped rebound,” adding that the second trough is “often lower than the first.”

Because of that pattern, the firm avoided introducing a 50-day moving-average strategy during the latest sell-off.

KB Securities continues to expect a 15%-23% correction and recommends “accumulating below 5,300pt” rather than shifting to a bearish outlook.

Geopolitical risks remain central to the near-term setup. The conflict involving Iran is being assessed through what KB Securities calls a “tariff war” framework, comparing it to the dynamics of the U.S.-China trade dispute.

The firm says the United States could escalate through strikes on energy infrastructure, assigning “little credibility” to claims of a pause in military action. Still, KB Securities does not view the situation as the start of a systemic breakdown.

On the possibility of a U.S.-Iran agreement, KB Securities argues that a fully reconciled deal is unlikely, but a limited ceasefire could still become a de facto end state, much like the Phase One trade arrangement.

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