Kospi records largest daily gain on AI chip rebound and US tech rally
South Korea's benchmark index posted its largest single-day gain on record as a rebound in artificial intelligence chipmakers highlighted the extreme volatility tying the nation's equities to the global tech trade.
The benchmark Kospi index surged 14 percent on Friday, marking its largest single-day jump on record according to LSEG data. The historic rally was led by memory chipmakers, with SK Hynix posting a record rebound and Samsung Electronics seeing significant gains.
The surge followed a robust overnight rally in U.S. technology stocks, driven by strong earnings from Microsoft, Amazon, and Meta that signaled continued artificial intelligence infrastructure spending. Domestic confidence also received a boost after SK Group Chairman Chey Tae-won disclosed personal purchases of SK Hynix shares.
Market mechanics played a crucial role in amplifying the move, as foreign investors led the buying alongside heavy short-covering. Mechanical rebalancing by leveraged exchange-traded funds further accelerated the gains on the final trading day of the month, coinciding with new cash-deposit requirements for leveraged ETF investors that took effect on July 31.
This dramatic reversal arrives just days after Korean equities endured one of their worst selloffs in recent history. That previous drop was triggered by global concerns over stretched artificial intelligence valuations, rising leverage, and signs of forced liquidations rippling through semiconductor stocks.
"The Korean stock market has been trading as if it has bipolar disorder, swinging from panic to euphoria almost overnight," said Jung In Yun of Fibonacci Asset Management. He characterized Friday's move as a violent reversal of an extremely crowded short position, though he cautioned that gains of this specific magnitude are unlikely to persist.
Despite the extreme swings, some analysts see underlying strength in the technology cycle. Rolf Bulk, a semiconductor analyst at Futurum Group, noted that the recent forced selling appears to have run its course and that there are no indications of the artificial intelligence infrastructure build-out slowing down.
However, others warn that the extreme volatility signals deeper structural risks rather than a stable recovery. Paul Gambles, co-founder of MBMG Family Office Group, argued that asset prices remain completely disconnected due to massive leverage in the system.
"We're not saying that this is it, but we're saying this is a sign that if this isn't it, it is coming down the track at some point, not too distant," Gambles said. The ultimate test for the market will be whether foreign capital continues to flow in once the immediate short-covering subsides.
