Morgan Stanley upgraded South Korean equities to overweight, citing a leverage washout that improved the risk-reward profile for AI-linked and industrial stocks. In a research note dated July 22, 2026, the firm maintained a KOSPI target of 9,000. Sector preferences rank banks as the top pick, followed by IT, industrials, and healthcare, with telecom services also upgraded to overweight. The firm advocates a barbell approach of leading technology stocks and defensive holdings, favoring defense, shipbuilding, and nuclear energy within industrials. The KOSPI experienced a 12.6% intraday plunge in late July, driven by collapsing demand for AI chips, with that session closing down roughly 6%. Earlier in 2026, Morgan Stanley had raised its end-2026 KOSPI target to 5,200 from an initial 4,500, driven by stronger-than-expected earnings and favorable market reforms. The forced selling from margin calls is seen as removing fragility. South Korea ranks among the top three countries for crypto trading volume, and its semiconductor industry is the hardware backbone of AI infrastructure, making these dynamics relevant to digital assets and the broader AI investment cycle.