Chip stocks soar as foreign investors buy over 7 trillion won of Kospi shares

South Korean stocks posted their largest daily gain on record Friday, as a chip-led rebound and massive foreign buying lifted the Kospi by more than 1,000 points.

The benchmark Kospi closed at 6,595.45, up 1,001.89 points, or 17.91 percent, marking record daily gains in both point and percentage terms. The index opened 1.15 percent higher at 5,657.79 before rapidly climbing by double digits to an intraday high of 6,630.77, up 18.5 percent.

A buy-side sidecar was triggered on the Kospi at 9:06 a.m., suspending program purchase orders for five minutes—a circuit-breaker mechanism activated when futures prices surge beyond a set threshold, signalling the intensity of demand. A similar curb was activated on the secondary Kosdaq, which closed 11.63 percent higher at 719.76, marking its second-largest daily percentage gain.

The rebound followed strong overnight gains on Wall Street, where technology stocks rallied on upbeat Microsoft earnings. The Nasdaq jumped 2.78 percent, and the S&P 500 gained 1.66 percent, while the Philadelphia semiconductor index soared 8.2 percent, lifting sentiment toward Korean chip heavyweights. Samsung Electronics and SK hynix together account for a dominant share of the global memory chip market, making the Kospi especially sensitive to shifts in semiconductor cycle expectations and AI infrastructure spending.

"Microsoft and Amazon reaffirmed plans to expand capital spending, easing concerns over AI investment and the semiconductor cycle," said Lee Kyoung-min, a senior analyst at Daishin Securities. "The growing perception that deleveraging is nearing its end, with much of the forced selling already absorbed, further boosted investor sentiment."

That view was echoed by JPMorgan in a Korea equity strategy report Friday.

"We now believe that leveraged ETF unwind is complete and hedge funds are done with around 90 percent of de-leveraging," the report said, adding that "the positioning setup in Korea now appears attractive on balance." It also noted that selling pressure from long-only foreign investors had "substantially eased."

Foreign investors drove the rally with net purchases of 7.25 trillion won ($5.06 billion) on the Kospi, extending their buying streak to a second day after snapping four consecutive sessions of net selling Thursday. Before the two-day buying spree, they had sold a net 18.5 trillion won worth of Korean stocks in July, on top of nearly 51 trillion won in net sales in June—offloading that had pressed the index to multi-month lows and weighed on the won.

Institutions, which began the day as net sellers, turned net buyers around midday and ended the session with net purchases of 1.15 trillion won. Retail investors took profits following the recent volatility, selling a net 8.26 trillion won.

Chip and electronics shares led the advance. Samsung Electronics closed 26.81 percent higher at 262,500 won, while SK hynix hit its daily upper limit, soaring 29.95 percent to 1,718,000 won. SK Square, SK hynix's largest shareholder, and Samsung Electro-Mechanics also finished at their respective upper limits.

The rally spread to other heavyweight stocks, with Samsung C&T rising 19.56 percent, Samsung Life Insurance 17.99 percent and Hyundai Motor 10.54 percent. Biopharma stocks bucked the broader advance, with Samsung Biologics and Celltrion falling 2.75 percent and 2.74 percent, respectively.

The won closed the daytime session 13.4 won stronger at 1,424 against the dollar, recovering after weakening to 1,436.9 intraday. The currency's partial recovery tracked the equity rebound, as foreign buying of Korean shares increased demand for the local currency.