A resurgence in artificial intelligence trading has ignited a strong rebound in memory chip stocks, lifting Asian markets broadly and positioning South Korea as the region's leader on Thursday.
The U.S. Labor Department reported on Wednesday that the core inflation rate for July fell to its lowest level since March 2021, with money markets now pricing in a less than 50% probability of a rate hike in September. This development has bolstered risk appetite across financial markets.
During the Asian trading session on Thursday, the MSCI Asia Pacific index climbed roughly 1%, Japan's Nikkei 225 advanced 1.2%, and Euro Stoxx 50 futures rose 0.3%.
South Korea's KOSPI index led the charge, surging as much as 4.8% intraday. The benchmark has now rallied approximately 22% from its July 30 low, officially entering a technical bull market. Both Samsung Electronics Co., Ltd. and SK hynix jumped more than 4%, with these two chipmaking giants serving as the primary engines of the current upswing.
South Korea Enters Bull Market as AI Trading Sees a Broad Revival
The KOSPI's powerful rebound marks a strong recovery from the historic sell-off witnessed in late July. In just about ten trading sessions, the index has gained over 22%, crossing the threshold into a technical bull market.
Samsung Electronics Co., Ltd. and SK hynix are the key drivers of this rally. Recent earnings reports from global tech behemoths have confirmed that capital expenditure on AI continues at elevated levels, boosting confidence in the future demand outlook for memory chips.
Qian Zhang, an emerging market equity investment specialist at Baillie Gifford, commented: "Memory demand has risen significantly due to the rise of AI agents and physical AI. However, we are entering this phase with quite limited supply capacity. That is precisely the bottleneck, and only a handful of companies globally can solve this problem."
Mark Newton, Head of Technical Strategy at Fundstrat Global Advisors, pointed out that the iShares MSCI South Korea ETF has broken through a key technical level, confirming a reversal pattern. "From a technical perspective, further upside looks attractive in the near term," Newton stated.
Newton also noted that memory stocks are beginning to outperform the broader tech sector, calling it a "positive near-term signal for memory to lead the technology sector." He added that the South Korean market and memory stocks are currently "a suitable vehicle for near-term risk-on exposure."
However, market participants remain divided on the sustainability of the rally. Kang DaeKwun, CEO of Life Asset Management, argued: "The market was oversold during the process of unwinding leveraged positions, and the current rebound is a natural recovery after capital flows stabilized." He cautioned that maintaining an upward trajectory will be difficult until the AI narrative and the direction of U.S. interest rates become clearer.
Other Market Developments
In commodities, Brent crude oil fell 1% to $88.06 per barrel, snapping a six-day winning streak. West Texas Intermediate (WTI) crude dropped over 1% to $82.23 per barrel.
During the Asian session on Thursday, spot gold briefly rose 0.5% before paring gains to trade up 0.12%, still holding steady above the $4,400 mark.
Data from the U.S. Labor Department on Wednesday showed that the Consumer Price Index (CPI) rose 0.2% month-over-month in July, in line with economist expectations. The core inflation rate dropped to its lowest level since March 2021. This data has further reduced bets on a Federal Reserve rate hike in September, providing support for a rebound in gold prices.
The USD/JPY pair is once again approaching the 160 level, keeping markets on alert for potential intervention by Japanese authorities.
Nathan Thooft from Manulife Asset Management commented: "Japanese authorities have demonstrated a willingness to act, including coordinated intervention with the U.S. Treasury. Exchange rate levels that are near or breaking through recent intervention zones will continue to keep traders cautious. We are definitely still in intervention-watch mode."
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