The dramatic reversal was driven by a powerful wave of buying in heavy-hitting chipmaking stocks, tracking global market relief over strong artificial intelligence earnings.
Samsung and SK Hynix Lead a Massive Market Rebound in Seoul
South Korea’s benchmark Kospi index clawed back lost ground on Friday, jumping more than 16% in early trading before settling into a 14% gain at 6,376.68 by midday, according to reporting by the Associated Press. The dramatic swing follows an brutal 17% plunge over the previous three days, a rout triggered by mounting investor anxiety over a potential artificial intelligence bubble and intensifying competition from chip rivals in China.
Individual technology shares bore the brunt of that earlier panic, but they spearheaded Friday’s recovery with explosive gains. Shares of South Korean technology giant Samsung Electronics surged 21%, while memory chipmaker SK Hynix soared 24.6%, the outlet noted. Despite the intense single-day recovery, the Kospi index remains significantly below the peak of over 9,000 it reached in June.
Wall Street Earnings and US Chip Forecasts Restore Investor Confidence
The sudden change in market sentiment was catalyzed by major overseas earnings reports that reassured investors about the durability of corporate spending on artificial intelligence infrastructure. Microsoft reported stronger-than-expected profits for the quarter, sending its shares soaring 15.5% for its best single day in nearly 18 years, Apnews.
Additional momentum arrived from U.S. memory giant Micron Technology, which issued a fourth-quarter revenue forecast of $50 billion, easily surpassing market expectations of roughly $43 billion, according to Mint. That robust outlook effectively quieted short-term fears that massive capital expenditures on AI hardware would fail to generate adequate returns.
Across Asian exchanges, the optimism rippled outward. Tokyo’s Nikkei 225 climbed 4.4% to 64,572.25, with OpenAI investor SoftBank Group jumping 15% and Tokyo Electron rising nearly 11%. In Taiwan, the Taiex surged more than 7%, while Australia, Hong Kong, and Shanghai also posted modest advances.
Trillion-Dollar Valuations and the Fallout from Leveraged ETF Selling
The recent volatility exposed deep structural vulnerabilities tied to South Korea’s retail investment habits, particularly the rapid rise and fall of single-stock leveraged exchange-traded funds. Driven by the global AI boom, both Samsung Electronics and SK Hynix crossed the $1 trillion market-capitalization threshold in May, businessinsider.com.
Both companies have since tumbled out of that elite club amid the broader market correction. Samsung reported a 1,800% rise in operating profit to 89.5 trillion won, or approximately $62 billion, but its stock remains 45% lower than its June peak. SK Hynix shares are down about 56% from their June high after an earnings report showed a 557% surge in operating profit that nevertheless fell short of analyst expectations.
The sharp pullback was severely magnified as retail investors rapidly unwound leveraged ETF positions. In response, South Korean authorities suspended new listings of single-stock leveraged ETFs this month and pledged regulatory guardrails to restrict retail access to the products.
Tax Proposals and Central Bank Stances Shape Future Market Risks
Beyond immediate chip sector swings, local market participants are weighing additional policy headwinds. Capitalmind founder Deepak Shenoy noted on social media that South Korean lawmakers are actively considering a proposal to tax unrealized gains, an idea that has sparked profound anxiety among long-term investors and wealthy promoters holding massive stakes in family-controlled conglomerates known as chaebols, Mint reported.
Meanwhile, macroeconomic policy pressures remained steady as both the Bank of Japan and the U.S. Federal Reserve opted to leave interest rates unchanged during their respective policy meetings this week. Currency markets experienced brief turbulence when the dollar fell sharply against the Japanese yen due to suspected coordinated currency intervention, though the dollar later recovered to 160.61 yen, Apnews.
Energy markets provided a stabilizing backdrop as oil prices slipped amid signs of slightly increased tanker flows through the Strait of Hormuz. Brent crude traded down 1.3% to $85.76 per barrel, while benchmark U.S. crude dropped 1.5% to $82.32 a barrel, easing broader concerns over inflation and supply chain bottlenecks as global equities attempt to find their footing.
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