South Korea's stock market experienced its sharpest reversal on record, with the benchmark Kospi index surging 14% on Friday, marking its largest one-day jump according to LSEG data [1]. This dramatic rebound capped a month of extreme volatility, highlighting the market's increasing sensitivity to global trends in artificial intelligence (AI) investment [1]. SK Hynix and Samsung Electronics both saw significant gains, with SK Hynix's rally further supported by share purchases disclosed by SK Group Chairman Chey Tae-won, which bolstered confidence in the company [1].
The rally was triggered by a powerful overnight surge in U.S. technology stocks, following strong earnings reports from Microsoft, Amazon, and Meta, which reinforced expectations of robust spending on AI infrastructure [1]. Foreign investors were identified as the main drivers behind the rally, while short-covering and mechanical rebalancing by leveraged exchange-traded funds (ETFs) amplified the gains. Additionally, new cash-deposit requirements for leveraged ETF investors, effective July 31, may have contributed to the repositioning in the market [1].
Jung In Yun of Fibonacci Asset Management described the market's behavior as 'bipolar,' swinging rapidly from panic to euphoria. He cautioned that while gains of this magnitude are unlikely to continue, the rebound could have further room to run due to previously bearish positioning and strong AI-memory fundamentals at SK Hynix [1]. The sustainability of the recovery, according to Jung, depends on whether foreign buying persists after the initial short-covering fades [1].
Rolf Bulk, a semiconductor analyst at Futurum Group, noted that the rally reflects renewed confidence in the ongoing AI investment cycle rather than a fundamental shift in market conditions. He observed that recent forced selling appears to have largely subsided and expressed a positive outlook on the sustainability of the AI infrastructure build-out [1]. However, Paul Gambles of MBMG Family Office Group warned that asset prices remain disconnected and that further volatility is likely, suggesting that the sharp rally may not signal the end of market turbulence [1].
CONCLUSION
South Korea's stock market staged a record-setting rebound, driven by renewed optimism in the AI sector and strong foreign investor activity. While analysts see potential for further gains if foreign buying continues, caution remains due to ongoing volatility and concerns about market disconnection. The sustainability of the rally will depend on continued confidence in AI infrastructure investment and the behavior of global investors.