Kospi Tops 6,700 Intraday as Fed Rates, Dollar and Chip Valuations Emerge as Key Variables

"If corporate valuations rise and the Fed cuts rates,

the Kospi could climb as high as 8,470

A weaker dollar may boost shipbuilders and other foreign-investor favorites"

The Kospi extended its rally after reclaiming the 6,600 level, briefly rising above 6,700 in intraday trading. Stocks have been climbing on the back of record corporate earnings, and a re-rating of semiconductor shares could prove decisive in determining whether the benchmark reaches 8,000, according to market analysis. Macro shifts, including Federal Reserve rate cuts and a weaker dollar, were also cited as key variables.

The Kospi closed up 0.39% at 6,641.02 on April 28. After finishing at 6,615.03 a day earlier, the index held above 6,600 and rose as high as 6,712.73 during the session.

Hyundai Motor climbed 5.92% to close at 555,000 won after unveiling the design of its new Grandeur sedan. Other Hyundai Motor Group stocks also advanced, with Hyundai AutoEver up 8.39%, Hyundai Rotem gaining 5.84%, Hyundai Mobis rising 3.35% and Kia adding 1.97%.

Among large-cap stocks, SK Hynix rose 0.62% to 1.3 million won. It touched 1.328 million won intraday, setting a fresh 52-week high. Samsung Electronics fell 1.11%, while Doosan Enerbility dropped 0.85% and Hanwha Aerospace slid 4.06%.

The Kosdaq closed down 0.86% at 1,215.58. Biotech shares were among the weakest performers, with Alteogen down 0.66%, Samchundang Pharm falling 2.92% and ABL Bio tumbling 19.28%.

Institutional investors led buying. Korea Exchange data showed institutions were net buyers of 351.1 billion won on the Kospi on April 28, extending a streak of net purchases to three straight sessions since April 24. Their biggest purchases were Samsung Electronics at 202.3 billion won and Hyundai Motor at 120.5 billion won. Retail and foreign investors were net sellers of 130.2 billion won and 193.5 billion won, respectively.

With the Kospi rising day after day, brokerages are lifting their targets for the benchmark. Hana Securities said in a recent report that the index could climb as high as 8,470 in the second half of this year.

According to Hana Securities, the Kospi's current return is comparable to the boom driven by the "three lows" in March 1987 and the 1998 tech bubble. This year, the brokerage said, earnings improvement rather than valuation re-rating has been driving the rally, implying further upside if corporate valuations are reassessed.

Hana Securities highlighted the potential for a higher price-to-earnings ratio for semiconductor stocks. It said Korean chipmakers could gain further if their PER rises from 6.3 to 8.0, matching Micron Technology's level.

Fed policy was also cited as a major variable. Lee Jae-man, a team leader at Hana Securities, said the chance of a Fed rate cut is increasing as the central bank moves to guard against an economic slowdown. If semiconductor PERs rise and the Fed cuts rates once or twice, the Kospi could reach 8,470.

A Fed rate cut could also weaken the dollar and improve foreign demand for market leaders such as Samsung Electronics and SK Hynix, Lee said. Even if current PER levels hold and the Fed does not cut rates, the index could still rise to 7,540, he added. He projects the rally in semiconductor shares will continue through the second quarter of 2027, based on expectations that operating profit margins will pass their peak around then. A weaker dollar could also leave room for further gains in machinery, shipbuilding, defense, hardware and chemical shares, sectors that have risen on foreign net buying.

Jin-kyu Kang, Hankyung reporter, josep@hankyung.com