KOSPI reverses 5% drop to positive as PCB stocks surge 18%

The KOSPI swung from a 5.2% intraday loss to positive territory Tuesday as Hong Kong-listed PCB makers surged on semiconductor supply chain demand.

The KOSPI reversed a 5.2% intraday rout to trade near 7,000, as Hong Kong PCB stocks surged as much as 18% on semiconductor supply chain optimism.

"The speed of this reversal suggests short-covering and dip-buying by retail investors who have been the primary force supporting Korean equities," said Francis Tan, chief strategist for Asia at Indosuez Wealth Management in Singapore.

Kingboard Laminates (01888.HK) jumped 18% and Kingboard Group (00148.HK) rose 14% in Hong Kong, tracking a broader rebound in semiconductor-exposed names. The KOSPI had entered a bear market earlier this month after falling about 25% from its record closing high of 9,114.55 reached in late June, yet remains the world's best-performing major equity index this year with gains of roughly 60%.

The whipsaw highlights the risks of a market where Samsung Electronics and SK Hynix now account for more than half of the KOSPI's total value, making the benchmark acutely sensitive to swings in AI chip stocks. Foreign investors have pulled a record of nearly $110 billion from South Korean equities this year, leaving domestic retail traders — who held 28 trillion won in margin loans as of July 14 — carrying the bulk of buying activity.

Leveraged Bets Fuel the Volatility

The KOSPI's volatility index stood at 82.07 on Tuesday after hitting a record 97.99 on June 29, compared with 28.85 at the end of 2025 — a level that signals extreme stress even by emerging market standards. SK Hynix, whose shares had tripled during the AI-driven rally before tumbling 14% on Monday, was among the biggest beneficiaries of Tuesday's rebound. A twice-leveraged ETF tracking the stock had plunged more than 30% in Hong Kong the prior session, illustrating the amplification effect of leveraged products on already concentrated positions.

South Korea's Financial Supervisory Service said it would monitor leveraged investment products and investigate excessive marketing if needed. The Bank of Korea has warned that single-stock ETFs could distort markets and increase volatility, particularly when two companies represent more than half of the benchmark's market capitalization.

PCB Rally Signals Sustained Chip Demand

The surge in Kingboard Laminates and Kingboard Group — both key suppliers of copper-clad laminates used in printed circuit boards — suggests investors are betting on sustained demand from the AI infrastructure buildout. The gains in Hong Kong came as the Hang Seng Index tracked regional markets higher, with technology names leading the advance. The broader Asian equity rebound followed a volatile session on Wall Street where the S&P 500 had closed down 1.2% amid concerns over Middle East tensions and their impact on oil prices.

Retail investors bought 13.2 trillion won of KOSPI shares in July after purchasing 42.4 trillion won in June, exchange data show. Their borrowed investment stood at 28 trillion won on July 14, down from a record 29.8 trillion won on June 24. The margin debt figures highlight the extent to which South Korea's retail-driven market has relied on leverage to sustain its rally.

"Korea is still the biggest portfolio overweight, but I started to reduce," said Alexander Redman, chief equity strategist at CLSA. "What worries me is that retailers are in the driving seat, because they use a lot of margin."

Despite the correction, earnings forecasts for Samsung and SK Hynix have risen so sharply that forward price-to-earnings ratios have actually fallen this year even as share prices more than doubled. Some veteran investors remain cautious. Billionaire investor Jim Rogers said he prefers markets that are deeply out of favor, adding that South Korea has not yet reached that stage despite its recent decline.

The won weakened past 1,505 against the dollar, extending this year's decline and adding to the headwinds for foreign investors who have already pulled a record amount from Korean equities.

This article is for informational purposes only and does not constitute investment advice.