South Korea's stock market is on an upward trajectory, with the benchmark index poised to enter a technical bull market as the rebound in global artificial intelligence (AI) trading fuels a rapid recovery from last month's historic sell-off. On Thursday, the benchmark Kospi index surged 4%, bringing its cumulative gain from the July 30 low to over 22%.
Memory chip makers such as Samsung Electronics and SK Hynix, heavyweight stocks that have significantly contributed to the index's rally, saw their shares post substantial gains. As global tech giants continue to demonstrate massive AI spending in their latest earnings reports, market enthusiasm for tech hardware stocks is resurging. This sentiment marks a stark contrast to the past few months, when the forced liquidation of leveraged chip stock positions not only triggered trading halts but also led to billions of dollars in losses for retail investors.
Recent government restrictions on single-stock leveraged ETFs, along with signs that investors are reducing margin debt, have helped stabilize the market. "Once leverage is unwound, the same market can experience a sharp rebound," said Maxence Visseau, chief investment officer of Dubai-based Arkevium Capital. "Investors who were forced to sell have disappeared. Short sellers have taken profits. Dealers have reduced their downside hedging."
Year to date, the Kospi index has risen more than 60%. The index plunged 22% in July, marking its worst monthly performance since the global financial crisis.
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