South Korea’s Kospi rockets 17% after massive 3-day selloff. What’s behind the surge?

South Korea's benchmark KOSPI index staged a dramatic comeback on Friday, jumping more than 16% to recoup almost all the losses suffered earlier this week. The rally was powered by sharp gains in heavyweight chipmakers Samsung Electronics and SK Hynix, tracking a strong recovery in U.S. technology stocks. Trading was briefly halted as has been the case this year amid sharp swings.

The KOSPI was up 17% at 6,549 points after tumbling nearly 17% over the previous three sessions, marking one of its steepest weekly declines, as fears of mounting competition from Chinese memory chipmakers triggered heavy selling across semiconductor stocks.

What’s behind the surge?

Investor sentiment improved after Wall Street rebounded strongly on Thursday, led by technology shares. Better-than-expected earnings from Microsoft renewed confidence in artificial intelligence spending and cloud demand, helping reverse concerns that massive AI investments were not translating into adequate returns.

Also read: Korea's pain will be India's gain? Why Nifty bears betting on Kospi crash may get disappointed

Microsoft led the advance after reporting robust Azure cloud growth, easing worries over the payoff from heavy AI infrastructure spending. Further, Amazon jumped more than 9% in extended trading after reporting second-quarter revenue that topped analysts' expectations, supported by continued strength in its cloud computing business.

The positive momentum spread to Asia, where Samsung shares surged more than 21% and SK Hynix soared over 26%. Both companies had reported strong quarterly results earlier this week. Samsung posted a record quarterly profit, driven by its semiconductor business, and said it expects a favorable supply-demand environment for memory chips to continue through at least 2027 while pointing to an increase in long-term customer contracts. SK Hynix also reported record revenue, although its quarterly profit came in below elevated market expectations.

Strong global cues

U.S. equities also rebounded on Thursday after the previous session's sell-off that followed the Federal Reserve's decision to keep interest rates unchanged. Technology stocks and semiconductor companies led the recovery. The Nasdaq Composite rose 2.8% to close at 25,122.18, snapping a six-session losing streak. The Dow Jones Industrial Average gained 613.92 points, or 1.2%, to finish at 52,208.06, while the S&P 500 advanced 1.7% to 7,437.63.

Earlier this week, semiconductor stocks had faced additional pressure as investors questioned the scale of artificial intelligence spending.

The key concern for investors remains whether companies investing billions of dollars in artificial intelligence can generate sufficient returns to justify those expenditures.

Further, developments in China further fueled investor concerns. ChangXin Memory Technologies (CXMT) made a blockbuster market debut, with its shares soaring nearly 500%. Reports also indicated that a Chinese state-backed company had begun producing immersion DUV lithography equipment.

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"The market's concern lies less in CXMT's current earnings and more in its potential for accelerated capacity expansion to rival Korean companies and technology development following its IPO," Kim Seok-hwan, a Seoul-based market analyst at Mirae Asset Securities, told Reuters.

Despite the recent rout, South Korea remains the world's best performing equity market in 2026. The sharp correction has dragged the benchmark KOSPI nearly 40% below its June peak of 9,386.

South Korea’s government has been scrambling to implement measures to protect investors’ wealth from the crashing stock market. Finance minister Koo Yun-cheol on Wednesday said that the government is reviewing market stabilisation measures, including adjusting regulations related to single-stock leveraged ETFs. Some analysts have said the products exacerbate market volatility.

Earlier this month, the finance ministry said market swings have intensified due to foreign and institutional investor profit-taking, portfolio rebalancing, and changing expectations around the global artificial intelligence sector. “Increasing concentration in the semiconductor sector has become a factor raising financial market volatility, with the impact of fluctuations in the chip sector on the whole stock market growing,” the ministry said in a statement.

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