Employees celebrate the end of the year trading at the Korea Exchange (KRX) on Monday, December 30, 2013.
Cho Sung Joon | Bloomberg | Getty Images
South Korean stocks rallied on Thursday, pushing benchmark Kospi into a technical bull market, as a global resurgence in AI trade fuels a sharp recovery after last month’s historic selloff.
The Kospi soared more than 4% in early trading, rebounding about 23% from its July 30 low, according to LSEG data.
Index heavyweights Samsung Electronics and SK Hynix led the gains, with the semiconductor giants rising more than 4% and 7%, respectively.
Investor appetite for technology hardware stocks is returning as the latest financial results from global tech giants show continued heavy spending on artificial intelligence.
Kospi’s recent rally has been fueled by renewed optimism on spending on artificial intelligence, sparking renewed interest in South Korea’s leading semiconductor stocks.
“The AI spending boom is far from over,” Trade Nation senior market analyst David Morrison said in a note late Tuesday, pointing to the strong performance of U.S. AI companies. Supermicro and cloud provider Coreweave soared overnight after better-than-expected results.
The development has given a new boost to South Korean chipmakers, whose fortunes are closely tied to demand for memory chips used in AI infrastructure. Samsung Electronics and SK Hynix led the Kospi’s rise, extending a sharp rebound from last month’s technology-led decline.
According to Fundstrat Global Advisors, South Korea’s leading memory chip makers have regained strength and there is room for Korean stocks to continue rising.
Mark Newton, the company’s head of technical strategy, said the iShares MSCI Korea ETF has broken through a key technical level on the back of gains in Samsung Electronics and SK Hynix, improving the short-term outlook for Korean stocks. The ETF’s latest move confirmed a reversal pattern that Newton said “looks technically attractive for further gains in the short term.”
A bigger signal may be coming from memory stocks themselves. Fundstrat said memory stocks have been hit hardest by the recent tech selloff, but are starting to outperform the overall tech sector for the first time since June.
Newton described this as a “short-term good sign for Memory in Technology,” adding that the group appears to be one of the last major corners of the tech sector’s upward trend.
This is important for South Korea given the significant influence of Samsung and SK Hynix in the Korean stock market. Fundstrat said South Korea’s economic recovery, coupled with a rebound in memory chips, is driving a broader return to the technology sector, even as some of America’s biggest tech companies struggle.
Newton remains bullish on the market in the short term, but warned that upward momentum could be lost later this month if Treasury yields fall and the dollar starts to rise again. But for now, Korean and memory stocks “look like they could be good vehicles for short-term risk-on exposure,” he said.
