The Bank of Korea said a robust chip cycle would act to limit downward pressure on domestic stocks — a diagnosis offered as the recent Kospi plunge sapped investor sentiment.

The central bank stressed that the recent correction owes more to external uncertainty and stretched valuations than to a fundamental deterioration in earnings. Its logic: if chip exports and the cycle stay firm, a trend decline in the index is hard to sustain.

Exports, led by memory chips, have in fact stayed strong up to recently. With AI-server and data-center investment underpinning demand for high-bandwidth memory (HBM), the earnings base of related firms is widely seen as intact.

The bank did guard against external risk, however. Should surging oil, the Fed's rate path and volatile global capital flows overlap, the market could swing in the short term.

Experts note that Korea's heavy reliance on a single sector — semiconductors — reveals the two-sidedness of this moment: it lifts the index in booms but deepens the fall in corrections.

For Sinophone residents in Korea invested in domestic stocks and funds, the bank's read is a reference point — though a central-bank forecast is itself only one of several scenarios.

The bank said it would keep monetary policy balanced, watching both prices and financial stability.