Korean stocks rebounded sharply after a three-day decline, with the KOSPI index rising 3.56% to close at 6747.95. Samsung Electronics surged 6.15% to 259,000 won and SK Hynix climbed 4.08% to 1,836,000 won, driven by foreign investor buying of 308.6 billion won amid leverage liquidation. The recovery stemmed from technical buying after the index fell over 10% in the prior two sessions, with analysts noting that recent declines reflected leverage ETF unwinding rather than fundamental deterioration. Regional semiconductor stocks rallied in tandem, with Japan's Nikkei 225 and Taiwan's index both posting strong gains as the sector recovered from sharp May losses.
KOSPI Records 3.56% Single-Day Gain
The KOSPI closed at 6747.95, up 3.56% from the previous trading day, recovering the 6700 level after three sessions. Semiconductor stocks led the advance, with Samsung Electronics finishing at 259,000 won (up 6.15%) and SK Hynix at 1,836,000 won (up 4.08%). Foreign investors net purchased 308.6 billion won on the KOSPI, while retail investors sold 1.6421 trillion won during the session.
Regional Semiconductor Stocks Rally in Tandem
Japan's Nikkei 225 index rose 3.26% to 66,232.19, led by Kioxia's 17.18% rebound after the stock fell over 16% in the previous session. Tokyo Electron gained 2.26% and Advantest rose 7.73%. Taiwan's TAIEX index climbed 4.2% to 44,232.87, with TSMC up 3.88% and MediaTek surging 9.88%. ASE Holdings advanced 6.03%, Nanya Technology 6.3%, and UMC 3.46%.
Analysts Attribute Decline to Leverage Liquidation
Kang Song-chul, researcher at Eugene Investment & Securities, stated that KOSPI levels of 6500-6600 already reflect scenarios where Samsung Electronics and SK Hynix profits are cut by half or more. Kang noted that 111.5 billion won flowed out of leveraged Samsung-Hynix ETFs on the 20th, potentially signaling capitulation selling. JP Morgan maintained its 12-month KOSPI target of 12,500, stating in a report that the recent correction was amplified by leverage ETFs and hedge fund position unwinding. The firm estimated that leverage ETF liquidation is 75% complete and hedge fund deleveraging over 50% complete. JP Morgan emphasized that market fundamentals remain strong from a macro perspective over the coming years.
DRAM Supply Tightness Emerges in Server Segment
DRAM prices have continued rising this month, with supply constraints intensifying in the server DRAM segment, according to Kim Sun-woo, researcher at Meritz Securities. Kim stated that supply shortages are deepening toward 2027 as Middle Eastern sovereign AI investment plans materialize alongside demand from US and Chinese cloud service companies. Heo Jae-hwan, researcher at Eugene Investment & Securities, noted that the index decline was too steep to attribute solely to leverage ETF supply issues, adding that KOSPI will recover its previous highs when expectations form that profit growth can continue for 2-3 more years without recession.
FAQ
What caused the KOSPI to rebound after three days of decline?
The KOSPI rose 3.56% to 6747.95 driven by foreign investor net buying of 308.6 billion won and a technical rebound in Samsung Electronics (up 6.15%) and SK Hynix (up 4.08%) following leverage liquidation.
How much of the leverage ETF liquidation has been completed according to JP Morgan?
JP Morgan estimated in its report that leverage ETF liquidation is 75% complete and hedge fund deleveraging is over 50% complete, describing this as a self-healing mechanism for the market.
What is JP Morgan's 12-month target for the KOSPI?
JP Morgan maintained its 12-month KOSPI target at 12,500, stating that recent corrections reflected leverage ETF unwinding rather than fundamental deterioration and that market fundamentals remain strong from a macro perspective.
