Chip Rally Lifts KOSPI 6.24% as SK hynix ADR Soars

Samsung Electronics (005930.KS) and SK hynix (000660.KS), Korea's two largest stocks, surged, lifting the KOSPI back above the 7,200 level for the first time in three trading sessions. The rally came as SK hynix's American depositary receipts (ADRs) jumped 27% overnight, adding to a wave of positive chip-sector momentum that included slower growth in the U.S. consumer price index (CPI) and better-than-expected second-quarter earnings from global semiconductor equipment maker ASML. Analysts pointed to the second-quarter earnings of U.S. Big Tech, which will indicate whether artificial intelligence (AI) investment has peaked, and the return of foreign investors as key variables for the domestic market going forward.

According to the Korea Exchange, the KOSPI closed at 7,284.41 on the 15th, up 427.58 points, or 6.24%, from the previous session. A buy sidecar, which suspends the effect of program-trading buy orders, was triggered just six minutes after the market opened. All 32 top stocks by market capitalization, from Samsung Electronics in first place to Woori Financial Group (316140.KS) in 32nd, advanced. Samsung Electronics finished at 279,500 won, up 6.27% from the previous session. SK hynix closed at 2,082,000 won, up 8.83% from the prior session, returning above the 2 million won mark for the first time in three trading sessions.

A convergence of overseas catalysts that revived chip-sector sentiment played a major role. British investment bank Barclays said in a report that SK hynix's ADR had room to rise to double its current price, setting a target price of $330, which led to the 27% overnight surge. Some 84,000 "Seohak ants," domestic investors who invest in U.S. stocks, made net purchases of about 300 billion won through nine major domestic brokerages on the 10th, the day SK hynix debuted on the Nasdaq. Easing concerns about rate hikes, following slower growth in the U.S. CPI for June, also acted as a positive factor.

Foreign investors made net purchases of 2.3308 trillion won on the day, continuing their buying streak for a second consecutive session from the 14th, providing further momentum for the market rebound. The day's net purchase was the largest since May 6 (3.1085 trillion won) and the fourth-largest so far this year. Foreign investors have sold 159.8095 trillion won on the KOSPI this year, weighing on the index's gains. Hwang Su-wook, an analyst at Meritz Securities, said, "The recovery of foreign investor flows, which began net selling and lowering their stakes after the peak on June 25, is key," adding, "If concerns over earnings confidence, centered on semiconductors, ease, funds are expected to flow in."

Analysts agreed that the second-quarter earnings of U.S. Big Tech and foreign investor flows should be watched as key variables for the domestic market. Starting with Alphabet on the 22nd, Microsoft and Meta Platforms (on the 29th) and Amazon (on the 30th) are set to announce their second-quarter earnings this month. With controversy over whether AI investment has peaked, their earnings and plans to expand AI investment are important factors that could stimulate investor sentiment going forward. Shin Seung-jin, head of the investment information team at Samsung Securities, said, "Rather than the AI growth cycle being over, AI chip-related stocks surged and then fell sharply, so investors have grown more concerned about whether uncertain further downside factors remain." He added, "At a time when single-stock leveraged exchange-traded funds (ETFs) for Samsung Electronics and SK hynix have recently amplified stock volatility, it will be important whether Big Tech's AI infrastructure investment has produced results and whether they will increase AI infrastructure investment going forward."

There are also observations that market volatility will continue for the time being, differing only in its magnitude. Because the domestic market is showing wild swings centered on chip stocks, the interpretation is that a "roller-coaster" market will continue for a while. Min Jae-ki, a director at KB Securities, diagnosed, "Big Tech's strong second-quarter earnings are only a short-term rebound factor, and the market will remain range-bound for the time being."