South Korea’s Kospi Index Soars Amid Global Market Gains and AI Stock Rebound

South Korea’s Kospi index experienced a significant rise of nearly 18% on Friday. This surge mirrored gains on Wall Street, as artificial intelligence-related stocks rebounded after previous losses. U.S. futures saw a 0.5% increase while oil prices dropped over 1%.

The Kospi started strong and then fluctuated, ultimately rising 17.9% to 6,695.45. This marked its largest one-day gain ever. Shares in major South Korean companies like Samsung Electronics and SK Hynix climbed 28% and 30%, respectively. Despite this rebound, the Kospi is still below its peak of over 9,000 from June. It had fallen more than 17% in the past three days due to concerns over an AI bubble and competition from Chinese rivals. The previous largest single-day gain for the index was nearly 12% in October 2008 during the global financial crisis.

Microsoft’s recent report revealed stronger-than-expected profits, viewed as evidence that heavy investments in AI are becoming profitable. As a result, Microsoft’s stock soared 15.5%, the biggest one-day gain in almost 18 years. This encouraged traders to return, buying shares in tech companies previously deemed risky.

European markets also opened higher on Friday. Germany’s DAX increased 1% to 25,870.09, while France’s CAC 40 gained 1% to 8,570.48. The FTSE in the UK rose 0.8%, reaching 10,983.31.

In Asian markets, Japan’s Nikkei 225 advanced 4% to 64,362.02. SoftBank Group, an investor in OpenAI, rose 13.8%, and Tokyo Electron, a chip equipment maker, climbed 6.2%. Stephen Innes of SPI Asset Management commented that investors shifted quickly from abandoning AI stocks to fiercely acquiring them.

The dollar improved 0.5% against the yen, valued at 160.28 yen. It followed suspected intervention by Japan and U.S. regulators after the dollar had consistently traded above 160 yen, close to 40-year highs. Japan’s Nikkei financial newspaper suggested coordinated action, involving the Federal Reserve Bank of New York conducting a ‘rate check’ among banks. Both Japanese and U.S. officials did not comment.

The Bank of Japan maintained its interest rates on Friday, concluding its policy meeting. Analysts speculated market intervention aimed to curb speculative trading. Jonas Golterman of Capital Economics speculated that while yen intervention may not yield immediate benefits, Japanese authorities’ persistence suggests the yen could stabilize around 160 yen this year before potentially rebounding next year.

Meanwhile, the Federal Reserve kept its benchmark rate steady this week. A disparity in interest rates between Japan and the U.S. has contributed to the yen’s declining value. The euro decreased to $1.1509 from $1.1524.

Elsewhere, Taiwan’s Taiex index increased by 8%, driven by a 10% rise for chipmaker TSMC. Australia’s S&P/ASX 200 saw a modest increase of 0.1%, reaching 8,976.80. Hong Kong’s Hang Seng rose 0.1% to 25,884.83, and China’s Shanghai Composite Index went up 0.7% to 3,832.26. An official survey showed that China’s factory activity contracted in July for the first time in five months, attributed to weak domestic demand and recent typhoons. The economy’s annual growth rate for the April-June quarter was 4.3%, slowing for more than three years. A Politburo meeting in China had no significant effect on the markets due to the absence of major policy announcements.

Oil prices dipped as tensions between the U.S. and Iran kept the Strait of Hormuz, a vital maritime passage for oil, mostly closed. Brent crude dropped 1.4%, priced at $85.70 per barrel, while U.S. crude fell 1.6% to $82.23 per barrel. Prior to the onset of the Iran conflict in late February, Brent crude was trading nearer $72. ING commodities analysts indicated increased oil flows through the Strait, easing supply concerns. Tanker traffic data showed a slight increase in crossings, albeit remaining limited.

On Thursday, Wall Street’s benchmark S&P 500 climbed 1.7%. The Dow Jones Industrial Average rose 1.2%, and the Nasdaq composite, with a focus on technology, went up 2.8%.

Reported by Chan from Hong Kong.