Kospi enters bull market on memory chip rebound
South Korea's benchmark index has entered a technical bull market as a rebound in AI hardware stocks helps the market recover from its worst monthly drop since the global financial crisis.
The Kospi climbed as much as 4.8% on Thursday, extending its rally from a July 30 low to roughly 22% and officially crossing into bull market territory. The advance was led by heavyweight memory chipmakers Samsung Electronics Co. and SK Hynix Inc., which both surged more than 5%.
The rapid recovery marks a stark reversal from July, when the benchmark plummeted 22% in its worst monthly performance since the global financial crisis. That historic sell-off was driven by forced liquidations of leveraged bets on chipmakers, which triggered trading halts and destroyed significant retail wealth.
Market stability has returned following recent government restrictions on single-stock leveraged ETFs and a broader reduction in margin debt. “I think the market overshot to the downside during the unwinding of leveraged positions, and the current rebound is a natural one as flow stabilized,” said Kang DaeKwun, chief executive officer at Life Asset Management.
The fundamental catalyst for the turnaround is renewed confidence in artificial intelligence spending. Latest earnings from US technology giants have confirmed massive continued investment in AI infrastructure. A subdued US inflation report on Wednesday further boosted sentiment by easing concerns about imminent Federal Reserve rate hikes, lifting chip peers on Wall Street.
Domestic factors are also at play. Expectations that Samsung and SK Hynix will soon unveil shareholder return programs have lifted their respective stocks in recent sessions. Despite the current rally, the Kospi remains roughly 24% below its late June peak.
Foreign institutional investors have been a persistent headwind, withdrawing more than $100 billion from Korean equities this year as the retail-dominated rally became overheated. However, overseas funds are beginning to trickle back in, drawn by valuations that became attractive following the summer crash.
Looking ahead, the demand outlook for memory chips remains robust despite lingering concerns about rising Chinese competition. The expansion of AI into physical applications and autonomous agents is driving unprecedented need for memory capacity.
Still, analysts warn that the market's upward trajectory is not guaranteed. “That said, I think it will be difficult for the market to sustain a continued rally until we see some stabilization in the AI narrative and US interest rates,” Kang added.
