South Korean equities bounced back after their biggest one-day slump on record, as bargain hunters returned to a market battered by panic selling.
The benchmark Kospi surged as much as 12%, the biggest intraday gain since October 2008, after sinking by about the same amount on Wednesday. Samsung Electronics Co. and SK Hynix Inc., the chip heavyweights that paced the country’s world-beating gains since the start of last year, both jumped more than 13%.
Thursday’s action is a swift turnaround after Korean shares tumbled to the brink of a bear market in just a few sessions. Following a world-beating rally fueled by the artificial intelligence trade and corporate governance reforms, the country bore the brunt of a global selloff as Middle East tensions spurred a broad de-risking move.
“Much of the move reflects technical traders stepping in to buy the dip after the market fell nearly 20% from its peak in just a matter of days, one of the worst-hit Asian markets,” said Gerald Gan, chief investment officer at Reed Capital Partners in Singapore.
“It remains unclear whether this marks a genuine inflection point for further upside or simply a bear-market rally, especially with geopolitical tensions continuing to escalate in the Middle East.”
Korean authorities briefly halted program trading in Kospi and Kosdaq markets after futures jumped at the open. Foreigners and retail investors were net buyers of Kospi shares during morning trading, while local institutions sold.
The slide earlier this week was driven by the jump in oil prices caused by the Iran war, which in turn raised fears over inflation and a potential hit to growth. For Korea, it exposed the risk of a rapid unwinding of crowded trades — which can exacerbate a selloff, especially if traders had used borrowed money to place big bets. Jitters still abound as the Middle East crisis may deteriorate further.
With the Kospi still up more than 30% this year even after the plunge, investors are weighing whether this week’s volatile swings mark the end of an overheated rally, or the start of a more selective phase of opportunity in Asia’s fourth-largest economy.
“These selloffs, especially in the last two days are completely positioning-driven, not fundamental driven,” said Rob Li, managing partner at Amont Partners, a hedge fund in New York.
Li thinks there are good opportunities to selectively buy Korean equities after the crash. “We want to be very surgical in terms of buying the companies,” he said, adding that SK Hynix fits the bill given its strong free cash flow generation and a reasonable price.
With assistance from Daedo Kim and Youkyung Lee.
This article was generated from an automated news agency feed without modifications to text.
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