KOSPI Index at a crossroads: Can South Korea's bull run reach 10,000?

The KOSPI Index has entered the longest bull market in decades. After bottoming at KRW 2,132 in 2022, it has jumped by 295% to the current KRW 8,476. It has jumped by 100% this year and by 215% in the last 12 months. So, the question is whether the blue-chip index will continue the bull run and hit KRW 10,000 or retreat?

KOSPI Index has jumped because of the AI boom

The ongoing Kospi Composite Index surge has been driven by the technology boom that has driven its top companies up by triple digits. Samsung Electronics has jumped by 163% this year and by 465% in the last 12 months. This rally has pushed its market capitalization to over $1.38 trillion.

Similarly, SK Hynix, a company that makes memory and other chips, has soared by 258% this year and by nearly 1,000% in the last 12 months. It has entered the exclusive $1 trillion market club as the growth gains steam.

Samsung and SK Hynix stocks have soared because of the ongoing AI boom that has pushed their revenues higher. For example, SK Hynix said that its revenue jumped by 60% QoQ and by 198% YoY to 52.58 trillion won in the first quarter, driven by DRAM and NAND volume and price surge. The company’s cash jumped to over 54.3 trillion KRW from 14.3 trillion KRW in the same period last year.

Other top companies in the index have also jumped this year. For example, LG Electronics stock has gone parabolic, moving to KRW 293,000, its highest level on record. It jumped by 315% in the last 12 months. Most of these gains accelerated last week after the company inked a partnership with Google.

Some of the other top gainers in the KOSPI Index are companies like LG CNS, LG Innotek, Solus Advanced Materials, Hyundai Autoever, and Doosan. 

The ongoing AI boom has led to the fear of missing out (FOMO) among market participants in the stock market. In most cases, when there is such a prolonged bull market, it is common for retail investors to buy. 

The rally, together with the falling South Korean won, has led to more demand from international investors. Recently, however, there are signs that these foreigners are dumping the shares.

Kospi Composite Index technical analysis

Kospi Index chart | Source: TradingView

The daily chart shows that the Kospi Index has been in a strong bull run this year, moving to a record high of KRW 8,476. It recently crossed the important resistance level at 8,036, its highest point on May 13.

The index has remained above all moving averages, while the Relative Strength Index (RSI) has continued rising. Therefore, based on trend-following principles, chances are that the index will continue rising, potentially to the key resistance level at KRW 10,000. 

In the long-term, however, there is a likelihood that the index will suffer a strong reversal as it moves to the distribution and markup phases of the Wyckoff Theory.