The market experienced a significant intraday reversal, with AI hardware stocks initially plunging before a dramatic "V-shaped" recovery fueled by positive news from South Korea. While consumer staples and pharmaceuticals saw strong gains, it was the intervention from South Korea that ultimately rescued the broader technology sector.
On June 29th, the major indices rebounded from their lows, with the Shanghai Composite Index rising over 1% in the afternoon and the STAR 50 Index surging more than 4% to a new high. By the close, the Shanghai Composite was up 1.16%.
A total of 2,469 stocks advanced across the two exchanges, with 124 hitting their daily limit-up, while 2,933 stocks declined.
The session featured a notable rotation in market leadership, with pharmaceutical stocks collectively posting strong gains.
The consumer sector also rebounded, with stocks like Dongpeng Beverage, Jiahe Food, and Bai Run Shares rising by their daily limit.
The semiconductor sector charted a deep "V" pattern, with multiple stocks surging to limit-up levels.
On the downside, hardware segments related to computing power, such as PCBs and CPO, faced significant selling pressure.
The AI and technology sector initially suffered a sharp sell-off but staged a powerful recovery following encouraging developments from South Korea. This helped the ChiNext Index reverse its losses and the STAR Index to surge. The South Korean stock market itself, after falling over 3% at one point, staged a late-session rally to recover most of its losses. South Korea's tech-heavy KOSDAQ index soared more than 8%.
The catalyst was news that Samsung Electronics and SK Hynix pledged massive investments during a government briefing, highlighting South Korea's commitment to advancing artificial intelligence.
South Korea's benchmark KOSPI index, which had been down as much as 3.4%, closed only 0.2% lower. Leaders from Samsung and SK Hynix, along with other industry giants, attended the meeting. Although Samsung and SK Hynix shares still ended the day lower, gains in sectors like energy, construction, and utilities—essential for building out AI infrastructure—provided support for the index.
South Korea's Industry Minister stated on Monday that the Samsung and SK groups each plan to build two chip factories, with a combined investment reaching 800 trillion won, approximately $518 billion. The country also aims to double its national DRAM production capacity within the next five years.
While investors are weighing the impact of such massive capacity expansion on chipmakers' profits, many view the government's initiative and its determination to build AI infrastructure as a positive for the entire industry.
Uday Vikram, co-CIO at Singapore-based Klay Group, commented, "Reinvesting these profits into capacity building while memory chip companies are earning huge profits is beneficial for South Korea's economy and industrial foundation."
The South Korean presidential office has dubbed this plan the "Three Super Projects for a Great Leap." As global AI development drives sustained strong demand for memory chips, Samsung Electronics and SK Hynix have become core enterprises in the global tech industry and trade.
Year-to-date, the share prices of both companies have more than doubled from their highs, meaning they are trading at over three times their levels at the start of the year. However, such massive gains also make them more vulnerable to swings in AI market sentiment.
Roy Lim, an equity sales trader at NH Investment & Securities in Seoul, noted, "Given the political importance of this project, the South Korean government is still likely to roll out more comprehensive supporting policies. What investors will be watching most closely next is likely the subsequent policy package."
The Samsung and SK groups stated they plan to build two chip factories each in the southwest of South Korea, with a total investment of 800 trillion won, to rapidly expand capacity and meet growing market demand.
South Korea also announced that several companies, including domestic internet giant Naver, will invest 550 trillion won to build AI data centers with a total capacity of 8.4 gigawatts by 2029.
Samsung announced an investment plan totaling 265.5 trillion won, with 203 trillion won earmarked for its semiconductor cluster in Yongin and Pyeongtaek.
Previous reports from the Korea Economic Daily indicated these companies are preparing to announce new investments totaling up to 2,000 trillion won over the next decade.
The news also sparked creative reactions and memes from online users.
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