Kospi Index rebounds as Samsung and SK Hynix rally: is the tide finally turning?

The Kospi Index continued its strong recovery as technology companies like Samsung and SK Hynix soared. It jumped to 7,377, up by 15% from its lowest point this month. Still, technicals suggest that the worst may not be over for the blue-chip South Korean index.

Kospi Index jumps ahead of South Korean Central Bank interest rate decision

South Korean stocks jumped as investors positioned themselves for the upcoming central bank decision. Economists polled by Reuters and Bloomberg expects the bank to hike interest rates by 50 basis points to 3.25% to combat inflation.

Recent data showed that the country’s inflation jumped to a 30-month high of 3.2% in June as energy prices soared during the US-Iran war. After falling recently, oil prices have now jumped above $80 a barrel as the war restarted.

Inflation has also been fueled by the massive bonuses and payouts that companies in the technology and adjacent sectors are paying during the artificial intelligence boom. As a result, the central bank will likely hope that a rate hike will slow inflation down in the near term. 

The Kospi Index jumped after South Korea released weaker macro data ahead of the interest rate decision. A report showed that imports jumped by 30% in June after soaring by 20.7% in May. This increase was lower than the expected 30.1%. 

South Korea’s exports jumped by 70.7%, helped by semiconductor and memory chips. The increase was also slightly lower than the expected 70.9%. As a result, the trade surplus expanded to $30 billion in June, lower than the expected increase of $36.15 billion

Samsung and SK Hynix stocks jump

The ongoing Kospi Index jump is being driven by its biggest constituents. Samsung stock jumped by over 7% after rumors emerged that it was considering raising cash in the United States. 

If this happens, it will be the second large South Korean company to list in the United States after SK Hynix, which debuted in the Nasdaq last Friday. Such a listing will help it raise billions of dollars that it can use to expand its operations in the country.

Samsung stock is also rising as its smartphone business continues to outperform despite broader industry headwinds. Global smartphone sales fell 4% in the second quarter, but Samsung expanded its market share to 22%, reinforcing its position as the world's largest smartphone maker. Apple ranked second with a 20% market share.

SK Hynix stock also jumped by 12.8%, while SK Square surged by 20%. This surge happened as Barclays predicted that the stock would double. Other top gainers during the session were companies like Samsung Electro-Mechanics, Samsung Life, and Samsung C&T.

However, it remains to be seen whether today's rally has staying power. The Kospi Index has recently exhibited heightened volatility, frequently surging by double digits in one session before reversing sharply the next.

Kospi Composite Index technical analysis

Kospi Index chart | Source: TradingView

The Kospi Index has become highly volatile in the past few months. It plunged to 6,434 on Monday and has now bounced back to 7,377. 

Despite this, it is too early to predict whether it is starting a new bull run. For one, it remains below the 50-day Exponential Moving Average (EMA) and the 23.6% Fibonacci Retracement level. 

The bearish outlook will remain until it flips these crucial resistance levels into support. Also, as we have warned before, there are signs that the index has entered the distribution phase of the Wyckoff Theory, which is usually followed by the markdown. If this happens, there is a risk that it will slip to the 50% retracement point at 5,848.