KOSPI breaks through 6,600 points, with foreign investment driving the semiconductor sector to lead the gains

South Korea’s KOSPI (Korea Composite Stock Price Index) for the first time closed above 6,600 points on the 27th, reigniting expectations of reaching 7,000 points. Although external variables such as the situation in the Middle East and uncertainty in U.S. politics exist, the Korean domestic stock market that day did not treat them as major destabilizing factors. Instead, corporate earnings outlooks led by semiconductors drove the index higher.

According to information disclosed by the Korea Exchange, the KOSPI rose 139.40 points (2.15%) from the previous trading day to close at 6,615.03 points. After opening at 6,533.60 points, the gains widened further, and during the day the index once climbed as high as 6,657.22 points, again setting a new record high. After first breaking 4,000 points on October 27 last year, it moved above 5,000 points on January 27 this year, above 6,000 points on February 25, and this time also surpassed 6,600 points. Given the fact that, amid the aftermath of the Iran war, even 5,000 points was once threatened, assessments say the recovery pace since this month has been extremely rapid.

The core behind this rally is buying by foreign investors and institutions. Foreign investors turned to net buying in the KOSPI market after 4 trading days, purchasing 899.4 billion won, while institutions also recorded net buying of 1.1014 trillion won. In particular, foreign capital was concentrated in the electrical and electronics sector. On the day, foreign investors’ net buying in that sector totaled 1.4541 trillion won. As a result, SK Hynix rose 5.73%, breaking through 1.3 million won for the first time during trading, and Samsung Electronics also gained 2.28%. The market believes that expectations for improved performance of South Korean semiconductor companies are the direct backdrop for foreign investors’ buying.

What the securities industry is focused on is not just supply and demand, but an upward trend in profit outlooks. Lee Kyung-soo (phonetic) of Hana Securities explained that after Samsung Electronics released its earnings, the KOSPI’s annual performance momentum (the trend of profit improvement) became even stronger. The market’s second-quarter operating profit forecast for the KOSPI was raised to the level of 193 trillion won, and the market’s average expectations have also continued to rise. Last weekend in the U.S. stock market, the Philadelphia Semiconductor Index surged 4% due to Intel’s unexpectedly strong results, which also boosted investment sentiment toward domestic semiconductor stocks. This week, major U.S. technology companies including Microsoft, Meta, and Google are expected to report earnings, leading some to observe that if the global trend of artificial intelligence investment and data center expansion is reaffirmed again, the domestic semiconductor and power equipment sectors may see sustained buying.

Overseas investment banks are also raising their expectations for the Korean stock market. JPMorgan cited upward revisions to profit expectations centered on memory semiconductors and proposed a KOSPI target of up to 8,500 points. Goldman Sachs also raised its 12-month target from 7,000 points to 8,000 points. These institutions believe that although the market has risen recently, the Korea stock market’s price-to-earnings ratio (P/E, defined as stock price divided by earnings per share) is still at around 7.5 times, meaning it remains undervalued. However, in the short term, the Federal Open Market Committee meeting scheduled for April 30 is a variable. With concerns about inflation intensifying due to recent increases in international oil prices, there is also caution regarding the U.S. Federal Reserve’s tightening—so-called hawkish signals. Some also point out that during April’s surge, first-quarter earnings expectations for major sectors such as semiconductors, defense, construction, and energy storage equipment had already been reflected to a considerable extent in stock prices. What happens next will depend on whether expectations for earnings improvement can continue, or whether monetary policy and geopolitical risk will again become the market’s core variables, which may cause a divergence in the pace of the challenge to reach 7,000 points.