Key facts
- South Korea's KOSPI index experienced a significant rally, recovering from a sharp sell-off.
- Samsung Electronics reported an 1,813% increase in second-quarter operating profit, driven by AI-driven demand for memory chips.
- The rally followed concerns over AI spending, which had previously led to a tech sector retreat.
- South Korean regulators plan to introduce measures to limit retail traders' access to leveraged ETFs to curb market volatility.
- The KOSPI has been highly volatile, with its volatility index surpassing its 2008 peak and triggering circuit breakers multiple times.
South Korea's KOSPI index experienced a significant rally, recovering from a sharp sell-off that had seen its volatility index surpass its 2008 global financial crisis peak. The surge was primarily driven by renewed optimism surrounding artificial intelligence demand, which boosted shares of major chipmakers Samsung Electronics and SK Hynix. Samsung Electronics reported a staggering 1,813% jump in second-quarter operating profit, with revenue and net profit also seeing substantial increases, meeting expectations and helping to lift its stock.
This rebound follows a period of intense volatility for the KOSPI, which had triggered market-wide circuit breakers multiple times. Analysts suggest that concerns over the vast sums being invested in AI and the timing of returns had contributed to the previous downturn. However, the underlying AI sector remains robust, as evidenced by Samsung's strong results and Microsoft's cloud growth.
In response to the market's volatility, exacerbated by concentrated trading in single-stock leveraged products, South Korea's government has pledged to introduce measures to curb retail traders' access to these instruments. This move aims to stabilize the market, which has seen its two largest chipmakers account for over half of the country's market capitalization.
Historically, Korean equities have traded at a discount relative to global peers, attributed to factors such as weak corporate governance, complex ownership structures, low dividend payout ratios, and geopolitical risks associated with North Korea. However, recent reforms and the AI boom have driven significant gains, with the KOSPI nearly doubling in the first half of 2026, prompting the government to raise its GDP growth forecast.