BlockBeats News, July 13th. In response to the recent sharp decline in the South Korean stock market, domestic independent global macro research firm TanTu Macro recently stated that South Korea's current financial risks are structurally similar to those before the 1996 Asian financial crisis (AFC): the semiconductor export proportion has reached 41% (compared to 16% in 1996), foreign ownership in the stock market has hit a historical peak of 40%, and the external debt/GDP ratio has risen to 39.6%.

However, the key differences are: 1) Sufficient foreign reserve adequacy ratio (ARA) at 92% (only 54% before the AFC), with the short-term external debt ratio falling to 9.4% (compared to 11.5% before the AFC); 2) The adoption of a floating exchange rate regime instead of a soft peg, weakening the risk of a run on the currency; 3) Slower growth in corporate leverage and bank non-performing loan ratio lower than during the AFC period.

Currently, the risk is mainly concentrated in the stock market: KOSPI's price-to-book ratio of 2x and price-to-earnings ratio of 30x have both reached record levels, with margin financing balance doubling in a year and a half to 386 trillion Korean won. The overall financial stability index indicates that the overall risk is at the historical 62nd percentile (yellow zone), and the valuation dimension is at the 91st percentile. The report's model estimates a 5% probability of South Korea entering negative growth in the next year, but the risk of a vicious cycle is significantly lower than during the AFC, mainly due to the strengthened buffer of foreign reserves and enhanced exchange rate flexibility. A recession of this magnitude has only occurred three times in the past thirty years. The core warning is: if the semiconductor cycle reverses or Fed tightening triggers foreign capital outflow, the stock market may become a risk transmission hub.