KOSPI Drops 20% From Peak, Analysts Debate Overheating Amid 8.7x PER vs 22.7x S&P 500

According to reports, KOSPI declined more than 20% from recent highs as of July 8–9, sparking debate among analysts over whether the market is overheated. South Korea's benchmark index is trading at a price-to-earnings (PER) ratio of 8.7x, significantly below the S&P 500's 22.7x and Nasdaq's 29.2x, leading some analysts to argue the market remains undervalued. The price-to-book (PBR) ratio stands at 2.7x, compared to 7.0x for Nasdaq and 5.5x for Taiwan.

Other analysts cite the Buffett Indicator—market capitalization as a percentage of GDP—reaching 221% in June, well above the historical average of 70.2% since 2000, as evidence of overheating. Additionally, the term premium (10-year minus 2-year U.S. Treasury yield spread) narrowed to 0.38% as of July 9, the lowest since April 2025, signaling potential economic slowdown. Semiconductor export prices, which drove KOSPI's 70% gain this year, also weakened; DRAM prices fell 4% month-over-month in June, the first decline since September 2025, raising concerns about peak memory-chip growth.