Kospi Index gets extremely overbought as Samsung stock hits all-time high

The Kospi Composite Index rallied to a new record high on Thursday, fueled by the ongoing Samsung stock price surge. It soared to a high of KRW 5,660, up by 115% in the last 12 months, making it one of the top gainers globally.

Samsung stock price drives South Korean shares higher

The Kospi Index continued its strong rally, helped by Samsung, the biggest company in South Korea. Its stock has jumped by 240% in the last 12 months.

Samsung stock soared to a record high after media reports suggested that it had launched a new chip, known as HBM, that will cost $700 a unit, up by between 20% and 30% from the current generation. The company had hinted of price hikes amid the ongoing memory shortage.

Samsung and other top semiconductor companies are making billions of dollars as demand for their products rise during the ongoing AI boom. For example, four American companies - Microsoft, Meta Platforms, Amazon, and Google - have pledged to spend over $650 billion this year. Total data center spending will be worth over $1 trillion this year.

Samsung and companies like SK Hynix are some of the top companies benefiting from the ongoing AI tailwinds. 

SK Hynix stock also jumped on Thursday as analysts now expect that it will boost the price of its chip to match Samsung’s HBM. The most likely scenario is where it moves the price from the current $500 to nearly $700, a move that will bring its operating margin to over 50%.

Global stock markets have soared

The Kospi Index rally mirrored that of other top global indices. For example, in Japan, the Nikkei 225 Index jumped and neared its all-time high.

Similarly, American indices like the Nasdaq 100, Dow Jones, and S&P 500 indices jumped by over 0.50% as the recent jitters on the artificial intelligence sector waned. 

Meanwhile, macro data from South Korea have been a bit encouraging, with inflation being subdued. The manufacturing and services PMIs have continued improving, while the central bank has maintained low interest rates.

Further supporting exports is the ongoing softness in the South Korean won. The USD/KRW exchange rate has jumped from 1,347 in June last year to the current 1,450. A weaker local currency boosts exports by making products cheaper to foreign buyers.

Most companies in the KOSPI Index have jumped this year. Mirae Asset is already up by 234% this year, while SK Securities, Korea Electric Power, HANWHA Solutions, and Daewoo Engineering have been the top gainers.

Kospi Index technical analysis 

The weekly chart shows that the Kospi Composite Index has soared in the past few months. This surge accelerated after the new president pledged to push it past the KRW 5,000 level.

The index now remains above the 50-week and 100-week Exponential Moving Averages (EMA). Data shows that the 50 EMA is at KRW 3,790, while the 100 EMA is at KRW 3,320. 

The Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have continued rising and are now in their overbought level. It is now in the markup phase of the Wyckoff Theory.

Therefore, the index will likely have a pullback in the coming weeks, potentially to the key support level at KRW 5,000 as it enters the distribution phase.