Citi reduces exposure to South Korean stock market, warns of overheating and overbought conditions far exceeding those of the U.S. market

Glonghui, May 18 | Citibank recently took partial profits on its long positions in South Korea's benchmark stock index KOSPI, cutting around half of its holdings. The decision was attributed to signs of market overheating coupled with rising risks stemming from global interest rate increases. Since the start of this year, KOSPI has surged 74%, ranking among the world's best-performing stock markets. This rally has been primarily led by chip manufacturing and tech stocks, benefiting from increasingly optimistic expectations for AI-driven demand. According to Citibank, the KOSPI is now even more overbought than U.S. equities, with more warning signals emerging, including excessive enthusiasm among local retail investors. However, Citibank emphasized that this reduction does not mean the trading strategy has ended; rather, the risk level has increased to the point where it is necessary to lock in profits on part of the positions while retaining the other half to continue benefiting should the market rally persist.