Citigroup has revised its rating on South Korea's stock market from overweight to tactical neutral. This adjustment is driven by the significant volatility observed in chip stocks in recent weeks, leading the institution to seek a reduction in its exposure to the artificial intelligence investment theme.

The KOSPI index has been a prime example of the turbulent trading activity surrounding AI, propelling it to become one of the world's top-performing equity markets this year. However, in recent weeks, the market has experienced severe fluctuations. These swings are attributed to intense retail investor interest in leveraged ETFs focused on individual stocks and growing concerns over valuations.

Citigroup noted that nearly all client discussions have recently shifted focus towards the potential for a broader market rally in the second half of 2026. Despite this, within its emerging markets allocation strategy, the bank remains cautious about a complete exit from the technology sector.

While maintaining a structurally bullish long-term view on the AI theme, Citigroup has downgraded South Korea to a neutral rating. Concurrently, it has upgraded its rating on China to overweight.