KOSPI Breaks Above 7,100 as Foreign Buying Extends to Fourth Session, Semiconductor Rally Accelerates

This Tuesday brings South Korea's second-quarter GDP and Japan's GDP, while Wednesday sees South Korea's August unemployment rate alongside the U.S. Treasury's first-ever long-bond buyback. On the same day in U.S. local time, Apple's unveiling of its new foldable iPhone is scheduled, drawing attention to related stocks.

Thursday is options expiration day and also brings the U.S. August Producer Price Index (PPI), alongside TSMC's August sales figures and earnings from Oracle and Adobe. Friday brings South Korea's early-September export data along with the U.S. August Consumer Price Index (CPI), which is singled out as this week's biggest event since it feeds directly into the Federal Reserve's rate decision scheduled for next week.

Panelists noted that Friday's CPI release timing — after the Korean market closes but before the U.S. market opens — works in Korea's favor. If the CPI print is favorable, Korean equities could be the first to react when trading resumes Monday.

There was debate over how to interpret employment data. Despite recent employment surprises, the probability of a rate cut stood at just 59%, well below the previous peak of around 70%, which analysts attributed to markets growing less trusting of employment data given its qualitative composition — growth concentrated in services such as leisure and hospitality, and a rising share of female employment. It was also noted that average hourly earnings rose just 3.1% year-over-year, below the inflation rate, meaning real wages have not actually increased.

As a result, with Fed officials divided, this week's CPI was singled out as the key variable that could tip the policy balance, and panelists noted that unlike last year's broad bull market, the current range-bound market requires closely tracking such indicators.

The KOSPI rose more than 2% intraday to reach 7,166 points. This marks a recovery of roughly 33 trading sessions since the index fell below the 7,000 mark on July 23, with foreigners and institutions both net buying in the cash and futures markets for four consecutive sessions cited as the driver. Notably, in the prior session foreigners net bought more than 3 trillion won in the cash market alone while retail investors sold more than 8 trillion won, marking an unprecedented handover of shares.

Panelists assessed that the KOSPI's recovery to 7,000 in about 40 days — after plunging from the 9,100 level in early June to as low as 5,500 — came faster than the market had expected. With this year's cumulative exports already surpassing last year's full-year total and South Korea being discussed as a potential fourth country worldwide, after the U.S., China, Germany, and Japan, to reach $1 trillion in exports, there was little concern over fundamentals.

The key was the return of foreign fund flows, with the falling exchange rate cited as the central driver. The won-dollar exchange rate has fallen by more than 200 won in a sustained trend, highlighting the appeal of Korean assets, with the interpretation that capital is shifting toward Korea relative to a comparatively weak Japanese market (the Nikkei rose just 0.07%). With markets now pricing in a 99% probability of an ECB rate hike and a 98% probability of a Bank of Japan rate hike, a chain of yen strength, dollar weakness, and won strength has formed.

However, retail overhang remains a burden. Estimates suggest cumulative net-bought retail positions across price bands could total as much as 170 trillion won, raising concerns that a rapid rise to the 7,500–8,000 range could trigger this overhang as selling pressure. That said, since retail investors have already offloaded a substantial portion of their holdings, one scenario suggested that once foreigners and institutions absorb this supply, the market could enter a supply vacuum that accelerates upside momentum.

Among large-cap stocks, Samsung Electronics gained around 3% and SK Hynix rose 5–7%, with Doosan Enerbility (on nuclear and gas turbine expectations), construction stocks, and semiconductor equipment/materials names leading gains. On KOSDAQ, Jusung Engineering surged more than 10%.

Late in the session, the KOSPI extended its gains further, rising to 7,166 points and entering the close up 2.3%. The KOSDAQ also rose about 0.7% to pass 828 points. Foreigners continued net buying of roughly 240 billion won in the cash market and a modest 40 billion won on KOSDAQ, while institutions bought led by financial investment firms.

Semiconductor strength stood out, with SK Hynix rising 5–7%, and it was noted that ahead of the following day's U.S. market open, sentiment toward the semiconductor sector remained favorable, with Micron up 3% and SK Hynix's ADR-equivalent premarket price up around 5%.

On KOSDAQ, Alteogen saw a pullback, while secondary battery and semiconductor equipment/materials stocks remained strong, with Jusung Engineering extending its gain to more than 10%.