South Korea's Kospi Index Rebounds 1% as Semiconductor Giants Rally Amid Market Turbulence

The Kospi index in South Korea surged by 1%, reaching 2606.67 points, showcasing resilience amidst recent market turbulence. This rebound was fueled by a recovery in semiconductor stocks, which had previously been impacted by a significant sell-off prompted by Nvidia's dramatic decline on Tuesday.
On Tuesday, major tech stocks in the U.S. experienced a downturn, with Nvidia leading the plummet with a 9.53% drop. This downturn was attributed to the U.S. Department of Justice intensifying an antitrust investigation into Nvidia, causing a record single-day market value drop of $278.9 billion. In response, the major U.S. indices closed with losses, leading to a ripple effect across Asian markets.
By Wednesday, the MSCI Asia Pacific Index had dropped by 2.4%, marking its steepest decline since the early August panic sell-off. Notably, semiconductor stocks were among the hardest hit, with key suppliers of Nvidia like Taiwan Semiconductor Manufacturing Company (TSMC) falling by 6.53%, Advantest Corp. from Japan dropping 7.74%, and South Korea's SK Hynix plunging 8.02%.
Despite these setbacks, the Kospi index showed a robust recovery on Wednesday, bolstered by gains in semiconductor giants such as Samsung Electronics, LG Energy Solution, and SK Hynix. The broader Korea Composite Stock Price Index (KOSPI) climbed by 1.3% at one point, while the South Korean electronics sub-index rose by 2.2%. Other sectors also saw gains, with casino stocks boosting after the approval of Kangwon Land's expansion plan.
Retail investors played a crucial role in the Kospi's recovery, net-buying 80.8 billion KRW worth of stocks. Conversely, foreign funds sold 64.9 billion KRW, and domestic funds sold 18.9 billion KRW. The smaller KOSDAQ index also joined the rally, achieving a 1.2% increase at one stage.
The market remains divided on the future trajectory of AI-related stocks. Some analysts have voiced concerns that the profits from AI stocks have far exceeded the technology's actual capabilities, raising new worries. The recent U.S. manufacturing activity data, which showed a contraction for the fifth consecutive month in August, exacerbated fears about the American economy, fueling a flight to safety in the markets.
Nonetheless, optimism persists among some investors regarding AI's growth potential. They argue that concerns about peaking demand for AI are overblown and predict sustained demand for AI and its supportive infrastructure into the first half of next year.
Despite the current volatility, many investors caution against interpreting Wednesday's decline as the onset of a market crash. Instead, some market participants suggest opportunistic buying in select stocks, given the expected continuation of robust AI spending. There is also an anticipation that the Federal Reserve might reduce interest rates in its upcoming meeting, potentially bolstering the stock market in September, historically a month known for significant market fluctuations.