Kospi Enters Bull Market Following Last Month’s Sell-Off
On Thursday, South Korea’s benchmark Kospi experienced an increase of nearly 4 percent, thereby entering technical bull-market territory, driven primarily by a significant recovery in chip stocks following last month’s sell-off. The index experienced an increase of up to 4.8 percent during the session, furthering its recovery from the low observed on July 30 to approximately 22 percent, as reported. It closed at 6,840.67, reflecting an increase of 3.98 percent. The Kospi experienced a decline of 22 percent in July, marking its most significant monthly drop since the global financial crisis of 2008. It has increased by over 60 percent thus far in the year, yet it is still approximately 24 percent lower than its peak in late June, according to source. Samsung Electronics and SK Hynix experienced notable increases on Thursday, each rising by over 5 percent. Samsung experienced a gain of 6.7 percent, whereas SK Hynix saw an increase of 5.5 percent.
The gains were attributed to a resurgence of investor interest in technology hardware stocks, driven by expectations of sustained expenditure on artificial intelligence infrastructure by major technology firms. Other Asian markets exhibited a range of performances on Thursday. Japan’s Nikkei 225 rose 0.8 percent to 67,524.06, while Taiwan’s Taiex gained 0.9 percent. The Shanghai Composite increased by 0.3 percent, reaching 3,946.68, whereas Hong Kong’s Hang Seng experienced a decline of 1 percent, settling at 25,401.92. Recent results from global technology companies indicate sustained investment in artificial intelligence, which bolsters demand for memory chips utilised in AI infrastructure, as reported. David Morrison stated, “The AI spending boom is far from over,” referencing robust performance from US AI-related companies.
Experts, as reported, indicated that memory stocks have begun to surpass the performance of the broader technology sector for the first time since June. The trend could support further gains in South Korean equities, given the influence of Samsung Electronics and SK Hynix on the Kospi, they added. The near-term demand outlook for memory chips remains bolstered by the expansion of AI into new applications and an increased utilisation of AI systems, as reported. “Because of AI agents and physical AI, memory demand has exploded, but we entered into this with a quite limited supply capacity – that’s where the bottleneck is,” Qian Zhang was quoted as saying. “We’re not saying the world will be building data centers forever at this speed, but that is a real physical bottleneck that only a few companies in this world can resolve,” Zhang added. The sharp decline in July resulted in an unprecedented number of trading halts, as intraday fluctuations exceeding 5 percent in the Kospi became a frequent occurrence. Market volatility has since diminished. Source reported that a measure of volatility had decreased to its lowest point since April.
South Korean regulators have implemented measures aimed at reducing demand for single-stock leveraged exchange-traded funds associated with chipmakers. Daily trading in these products has declined following the implementation of new minimum cash deposit requirements. On Thursday, foreign investors engaged in the purchase of Korean stocks, despite their overall position as net sellers for the year. Source reported that foreign investors had pulled over $100 billion from the market this year. US inflation data also bolstered market sentiment. Consumer prices increased by 0.2 percent in July compared to the prior month, aligning with the forecasts of economists. A key measure of underlying inflation has registered its most sluggish rate since March 2021. The data diminished anticipations for an imminent interest-rate hike by the US Federal Reserve, thereby bolstering US-listed semiconductor equities.
