KOSPI on a tear, but on ‘high alert’… Will it pause as U.S. stocks weaken? [Market Preview]

Attention is on whether the KOSPI will rewrite its all-time high again on the 4th. The previous day, the KOSPI shook off the “Kevin Warsh shock,” surging 6.84% to set a fresh record. Still, with U.S. stocks in New York falling overnight, some expect Korea’s market to take a breather.

The KOSPI jumped 6.84% (338.41 points) to close at 5,288.08, resetting its record high. When KOSPI 200 futures spiked at 9:26 a.m. intraday, a program-buying curb (buy-side sidecar) was triggered, temporarily halting the validity of program buy quotes. Institutions and foreign investors drove the index higher, buying 2.17 trillion won and 717 billion won worth of shares, respectively.

Samsung Electronics, which had fallen more than 6% the day before, rallied 11.37% to finish at 167,500 won, an all-time closing high. It also marked its biggest one-day gain since Jan. 4, 2001 (11.37%). SK hynix rose 9.28% to close at 907,000 won. The two companies’ combined market capitalization increased by 157.0281 trillion won in a single day.

Profit-taking hit the market the previous day on the pretext of the nomination of the next Federal Reserve chair. But as the view spread that there had been no change in corporate earnings and liquidity—pillars of the domestic market rally—bargain hunting poured in.

Overnight, Wall Street, seen as a bellwether for Korea’s market, closed lower. The Dow Jones Industrial Average fell 0.34% to 49,240.99. The S&P 500 lost 0.84%, and the Nasdaq Composite slid 1.43%.

As concerns grew that artificial intelligence (AI) technology could upend the traditional software (SW) industry, major SW firms as well as data and research-service companies extended broad declines.

In addition, large private equity funds that have invested in these sectors also plunged amid worries that they have high risk exposure.

Major SW names including Salesforce (-6.85%), Intuit (-10.89%), Cognizant Technology (-10.14%), ServiceNow (-6.97%) and Adobe (-7.31%) posted steep losses.

Travel booking platform Expedia tumbled 15.26%, while data analytics and research firms such as FactSet Research (-10.51%) and S&P Global (-11.27%) also saw heavy declines.

With fears mounting that the private equity industry—which has increased allocations to software—could take a hit, major players such as Ares Management (-10.15%) and Blue Owl Capital (-9.76%) also fell sharply.

Korean stocks may also come under pressure from the weakness in U.S. equities. Memory semiconductor makers, rather than software and hardware companies, are seen as being in a beneficiary phase. However, analysts note that even though AMD delivered an earnings surprise after the close that day, it was down in the 7% range in after-hours trading due to elevated expectations—potentially providing an incentive for profit-taking in Korean chip stocks.

Han Ji-young, a researcher at Kiwoom Securities, said, “Profitability issues for AI-related businesses excluding semiconductors—such as hyperscalers, software and hardware—could be a task that needs to be carried not only through fourth-quarter results but into first-quarter results,” adding, “Until then, it makes sense to increase preference for memory makers within AI stocks, where earnings visibility is higher.”

He added, “Given the record-level volatility the KOSPI has shown over the past two sessions, intermittent pullbacks may emerge,” but advised that “even if such a pullback unfolds, strategies to raise exposure to market leaders—such as semiconductors, brokerage firms and defense—and to buy on dips remain valid.”

By Maeng Jin-gyu maeng@hankyung.com