South Korean Stocks Post Their Biggest Daily Rebound on Record, Ending a Black July
South Korean stocks staged their biggest rebound on record on Friday, bringing a tumultuous “Black July” to a close. The KOSPI index surged 17.91% at the close, its largest single-day gain in history. SK hynix hit the 30% daily price limit for the first time in its history, while Samsung Electronics jumped 26.81%, sending its market capitalization back above $1.2 trillion. The two leading memory-chip makers delivered an extraordinary joint rebound. U.S. technology stocks rallied sharply overnight, helping set the stage for Friday’s recovery in South Korea. Microsoft, Amazon and Meta each reported strong earnings, further reinforcing the market’s view that capital spending on AI infrastructure will remain robust. Another positive factor came from Chey Tae-won, chairman of SK Group, who publicly disclosed on Thursday that he had increased his holdings of SK hynix shares. The move strengthened market confidence in the world’s second-largest memory-chip maker, according to the source. Just days earlier, concerns over high valuations and elevated leverage in the AI sector had continued to build. Signs of forced liquidation then emerged, sending panic through South Korea’s semiconductor stocks and triggering a severe selloff in the broader market. Jung In Yun, chief executive of South Korean quantitative asset manager Fibonacci Asset Management, said the market’s recent moves resembled bipolar disorder, shifting almost overnight from panic to euphoria. “Today’s trading was a violent reversal following a highly crowded liquidation wave,” he said. Jung said foreign investors appeared to be the main force behind Friday’s rebound, while short covering and mechanical ETF portfolio rebalancing amplified the gains. Mechanical portfolio rebalancing refers to leveraged ETFs automatically adjusting their positions according to preset rules before the daily close to maintain a fixed leverage multiple. Such trading can reinforce gains or losses and magnify market volatility. Industry participants said new initial-margin requirements for leveraged ETF investors took effect Friday, prompting some investors to adjust their leveraged positions. The rules raised the trading threshold and limited the entry of new leveraged short positions. Some investors also reduced their holdings in leveraged short ETFs and closed bearish positions. The related hedging adjustments generated buying demand and may have contributed to the rebound to some extent. Will the recovery last? Jung said in an interview that he did not expect such a large gain to continue. However, because market positioning had become extremely bearish and SK hynix’s fundamentals in AI memory remained strong, the rebound itself could still have further room to run. “The real test is whether foreign investors continue buying after today’s wave of short covering subsides,” he said. “If they do, this could develop into a more durable recovery.” Rolf Bulk, a semiconductor industry analyst at global technology research firm Futurum Group, said the main drivers of the rally were not an improvement in fundamentals, but the clearing of liquidation pressure and a recovery in market confidence. He said the recent pressure from forced liquidations in South Korean stocks appeared to have largely run its course. “Over the past month, we have seen unprecedented volatility in the South Korean stock market, culminating in this recovery on the final trading day of the month,” Bulk said. “There is currently no indication that AI infrastructure construction is slowing, and we remain optimistic about the sustainability of the AI upcycle.” Paul Gambles, co-founder of investment advisory firm MBMG, warned that the sharp rise was another violent swing in an increasingly unstable market. “I think we will see many more days like this,” Gambles said. “Asset prices have become completely detached from fundamentals, and there is enormous leverage in the market.” He said high leverage combined with fragile investor confidence left the market highly vulnerable to a large-scale correction. Gambles said Friday’s move was only a rebound driven by a recovery in market sentiment. It could last longer, he said, but that would not mean the risks surrounding the AI boom had disappeared. “We are not saying that a deep correction is about to arrive immediately,” he said. “But even if the major decline has not arrived yet, it will come soon.” The one-day surge appears unlikely to erase the shadow cast by the preceding selloff. It remains to be seen whether the powerful rebound signals a lasting recovery or merely a brief respite after a steep decline.
The KOSPI index surged 17.91% at the close, its largest single-day gain in history. SK hynix hit the 30% daily price limit for the first time in its history, while Samsung Electronics jumped 26.81%, sending its market capitalization back above $1.2 trillion. The two leading memory-chip makers delivered an extraordinary joint rebound.
U.S. technology stocks rallied sharply overnight, helping set the stage for Friday’s recovery in South Korea. Microsoft, Amazon and Meta each reported strong earnings, further reinforcing the market’s view that capital spending on AI infrastructure will remain robust.
Another positive factor came from Chey Tae-won, chairman of SK Group, who publicly disclosed on Thursday that he had increased his holdings of SK hynix shares. The move strengthened market confidence in the world’s second-largest memory-chip maker, according to the source.
Just days earlier, concerns over high valuations and elevated leverage in the AI sector had continued to build. Signs of forced liquidation then emerged, sending panic through South Korea’s semiconductor stocks and triggering a severe selloff in the broader market.
Jung In Yun, chief executive of South Korean quantitative asset manager Fibonacci Asset Management, said the market’s recent moves resembled bipolar disorder, shifting almost overnight from panic to euphoria. “Today’s trading was a violent reversal following a highly crowded liquidation wave,” he said.
Jung said foreign investors appeared to be the main force behind Friday’s rebound, while short covering and mechanical ETF portfolio rebalancing amplified the gains.
Mechanical portfolio rebalancing refers to leveraged ETFs automatically adjusting their positions according to preset rules before the daily close to maintain a fixed leverage multiple. Such trading can reinforce gains or losses and magnify market volatility.
Industry participants said new initial-margin requirements for leveraged ETF investors took effect Friday, prompting some investors to adjust their leveraged positions. The rules raised the trading threshold and limited the entry of new leveraged short positions. Some investors also reduced their holdings in leveraged short ETFs and closed bearish positions. The related hedging adjustments generated buying demand and may have contributed to the rebound to some extent.
Will the recovery last?
Jung said in an interview that he did not expect such a large gain to continue. However, because market positioning had become extremely bearish and SK hynix’s fundamentals in AI memory remained strong, the rebound itself could still have further room to run.
“The real test is whether foreign investors continue buying after today’s wave of short covering subsides,” he said. “If they do, this could develop into a more durable recovery.”
Rolf Bulk, a semiconductor industry analyst at global technology research firm Futurum Group, said the main drivers of the rally were not an improvement in fundamentals, but the clearing of liquidation pressure and a recovery in market confidence.
He said the recent pressure from forced liquidations in South Korean stocks appeared to have largely run its course.
“Over the past month, we have seen unprecedented volatility in the South Korean stock market, culminating in this recovery on the final trading day of the month,” Bulk said. “There is currently no indication that AI infrastructure construction is slowing, and we remain optimistic about the sustainability of the AI upcycle.”
Paul Gambles, co-founder of investment advisory firm MBMG, warned that the sharp rise was another violent swing in an increasingly unstable market.
“I think we will see many more days like this,” Gambles said. “Asset prices have become completely detached from fundamentals, and there is enormous leverage in the market.”
He said high leverage combined with fragile investor confidence left the market highly vulnerable to a large-scale correction.
Gambles said Friday’s move was only a rebound driven by a recovery in market sentiment. It could last longer, he said, but that would not mean the risks surrounding the AI boom had disappeared.
“We are not saying that a deep correction is about to arrive immediately,” he said. “But even if the major decline has not arrived yet, it will come soon.”
The one-day surge appears unlikely to erase the shadow cast by the preceding selloff. It remains to be seen whether the powerful rebound signals a lasting recovery or merely a brief respite after a steep decline.