As unprecedented stimulus packages to fuel South Korea’s COVID-hit economy run out, investors are increasingly worried over a possible bubble burst in stocks, property and cryptocurrencies that would make it harder for the already wobbly benchmark Kospi to return to its record highs a year ago.

The Bank of Korea, which has already lifted interest rates twice this year to combat red-hot inflation, is expected to back another raise Thursday while eyeing more hikes later in the year. Rising bond yields amid a tumbling Kospi is making investors rethink their options, according to market watchers.

“The bond market is fine but a bubble is bursting in the stock market. The housing market will be next,” said Kim Young-ick, an economics professor at Sogang University’s Graduate School of Economics. Since starting at 2,988 in January, the main board has been holding out on a narrow 2,600-point range.

The Kospi will take a hit from the bubble deflation, Kim said, calling the fallout unprecedented and worse than the dot-com bubble burst in 2000 and the housing bubble in 2008, when Korea saw housing prices drop 40 percent from their ceiling prices amid the global financial crisis.

Hwang Sei-woon, a senior research fellow at the Korea Capital Market Institute, said at the worst the Kospi could nosedive to one-third of 3,305, the all-time high seen on July 6 last year on the euphoric rush in response to government cash injections and spending pledges for COVID relief.

“Especially, bitcoin represents an uncanny resemblance to the dot-com bubble because they are essentially the same. Speculation is what’s propping up the digital currency. It will soon be worth half what it is now,” Hwang said.

Meanwhile, local brokerages said the US rate hikes to come because of persistent inflation and slowing global economic growth would be the major reasons behind a jumpy Kospi. The firms all agreed that it would not reach the pre-pandemic 3,000-point range.

“The US Fed had carried out policy tightening seven times since the 1980s and the economy seemed to have shown contracting after the market support was withdrawn. … The same pattern may as well prevail this time,” IBK Securities said in a note.

But if South Korea sees a smaller-than-expected cash outflow prompted by the loss of Seoul’s rate premium over the US and global trade bottlenecks ease faster than projected, investors could bet on a gradual Kospi rebound, according to Korea Investment & Securities.

Seo Sang-young, head of the media contents department at Mirae Asset Securities, said the Kospi would face market correction as it approaches year-end, pricing in concerns over a slowing global growth extending to early 2023.

An uptick in global growth cannot be ruled out entirely, because China could use stimulus measures to lift the economy, Seo added.