Kospi Enters Bull Market in a Month Driven by AI Trade

South Korea's benchmark stock index, Kospi, surged on Thursday, entering a technical bull market territory, driven by the global artificial intelligence (AI) trading frenzy. The index has recorded a significant rebound of approximately 23% since its low at the end of July. This rapid ascent marks a notable turnaround in the market following a historic sell-off experienced last month.

The market had previously entered bear market territory in early July, specifically on July 8, following a sell-off in AI-related chip stocks. However, exhibiting a strong recovery since its July 30 trough, the Kospi was bolstered by a revival in global AI trade and renewed investor interest in memory chip manufacturers. Leading players such as Samsung Electronics (005930.KS) and SK Hynix (000660.KS) spearheaded this rally, with their stocks rising by over 4% and 7% respectively.

This development further solidifies the South Korean market's role as a key barometer for the AI trade. Experts note that increasing AI expenditures have accelerated the performance of chipmakers, reshaping the country's stock market landscape. Memory chip stocks, despite being among the hardest hit during the recent tech sell-off, have begun to outperform the broader technology sector.

The market's recovery also draws attention within a broader economic context. Rising AI demand directly boosts revenue expectations for South Korea's largest publicly traded companies. Although foreign investors recorded net sales of $6.2 billion in July, this figure was significantly less than in previous months, indicating that some investors were buying on dips. Furthermore, US consumer price index (CPI) data eased concerns over additional interest rate hikes by the Federal Reserve (Fed), providing a supportive backdrop for equities.

Financial advisory firms like Fundstrat Global Advisors suggest that the rebound in South Korean equities may have further room to run. Mark Newton, the firm's head of technical strategy, indicated that the iShares MSCI South Korea ETF has broken through key technical levels, improving its near-term outlook. Analysts emphasize that positioning has improved after the correction, but the recovery may still remain fragile.