South Korea\'s KOSPI fell more than 5 percent on the first trading day of August, a day after posting a record rebound, as foreign and retail trading flows flipped. Analysts said it was too early to view the bounce as a trend reversal. The won-dollar exchange rate, semiconductor earnings confidence, U.S. rate direction and global risk appetite were cited as key variables. Brokers largely expect gradual recovery rather than a V-shaped rebound.

The Bank of Korea said South Korean stocks have seen a steep correction due to worries about a slowdown in AI investment and heavy foreign selling, but a strong earnings outlook for semiconductor companies could limit further declines. It said leverage investment has increased price swings since May. The central bank reaffirmed the need to maintain a tightening bias, saying the timing and pace of further rate hikes will depend on inflation pressures, the growth recovery and financial stability conditions.