South Korean Kospi Rallies 6% Amid AI Chip Optimism Despite Weekly Loss

South Korean equity markets witnessed a massive recovery on Friday, led by a surge in semiconductor giants following optimistic reports regarding AI chip partnerships. However, despite the sharp rally, the benchmark index remains in the red for the week as global tech volatility continues to weigh on investor sentiment.

Semiconductor Giants Drive the Kospi Rally

The benchmark Kospi index surged by 440 points, or 5.76%, reaching the 8,008 mark during intraday trading. This massive jump was largely fueled by the heavyweights in the semiconductor sector, which had faced significant downward pressure earlier in the week due to fears that the AI-driven market rally might have reached its peak.

Samsung Electronics emerged as a standout performer, with shares rallying over 8%. This surge follows reports that Anthropic PBC is currently in discussions with the chipmaker to establish a manufacturing partnership for custom AI chips. Adding to the momentum, SK Hynix shares jumped by 7%, while LG Energy Solution also saw marginal gains. Despite the rally in heavyweights, the broader market showed a mixed trend, with 406 shares advancing and 471 declining out of 912 issues traded.

Foreign Selling and Currency Weakness

Despite the positive price action on Friday, the overall weekly performance for the Kospi was negative, ending the week down 3.84%. A significant factor contributing to this volatility is the continued exit of foreign capital. According to Reuters, foreign investors emerged as net sellers, offloading shares worth 1,501.9 billion won.

The South Korean won also faced significant headwinds, weakening against the US dollar. On the onshore settlement platform, the won was quoted at 1,544.4 per USD, a 0.28% decline from its previous close of 1,540.0. This depreciation highlights a broader trend, as the won has fallen by 6.8% against the USD so far this year. This currency weakness often creates additional pressure on emerging markets and can influence the flow of foreign institutional investment.

In the money and debt markets, there were subtle movements in treasury yields. September futures on three-year treasury bonds gained 0.08 points to reach 103.11. The yield on the most liquid three-year Korean treasury bond slipped by 1.5 basis points to 3.732%, while the benchmark 10-year yield saw a minor decline of 0.7 basis points, settling at 4.173%.

While the weekly loss reflects recent volatility and the "peak AI" narrative, it is important to note the long-term trajectory of the Korean market. The Kospi has demonstrated remarkable strength throughout the year, climbing an impressive 89.25% year-to-date.

Key Takeaways

  • AI Optimism Fuels Recovery: Samsung Electronics (+8%) and SK Hynix (+7%) led a 5.76% Kospi rally, driven by potential AI chip manufacturing partnerships.
  • Foreign Outflow Persists: Despite the Friday rebound, foreign investors remained net sellers to the tune of 1,501.9 billion won, contributing to a 3.84% weekly index decline.
  • Currency Pressure: The South Korean won continues to face pressure, falling 6.8% against the US dollar so far this year, currently trading around 1,544 per USD.