Here’s why the Kospi Index is surging today, and the next target to watch

The Kospi Index jumped sharply on Monday as Asian stocks welcomed the new deal between the United States and Iran. It rose to 8,570 KRW, its highest point since June 4, and much higher than this month’s low of 7,373 KRW. 

South Korean stocks and bonds are jumping today

The Kospi Index rose by over 5%, mirroring the performance of other Asian stock indices like Japan’s Nikkei 225 and Topix. South Korea’s bonds also jumped, with the ten-year falling to 4.117%, down from the year-to-date high of 4.4%. 

This surge happened as investors embraced a risk-on sentiment in the market following the decision by the Trump administration to strike a deal with Iran. 

The deal, which has been telegraphed in the past few days, will see Iran reopen the Strait of Hormuz without charging any tolls. This explains why crude oil and natural gas prices plunged on Monday, continuing a sell-off that has been going on in the past few weeks,

The deal is, in particular, highly bullish for South Korea, a country that depends mostly on oil coming from the Middle East. It comes at a time when it has used most of its strategic petrolem reserves.

This deal also means that South Korea’s inflation will reverse in the coming months, making it easier for the central bank to avoid hiking interest rates. 

The Kospi Index is also rallying because of the ongoing tech stocks jump after last Friday’s SpaceX IPO, in which the company raised over $75 billion at a valuation of over $1.7 trillion. Its stock then jumped by 19%, with its valuation crossing the $2 trillion mark.

The IPO means that other high-flying technology companies like OpenAI and Anthropic will also file to go public later this year. Such a move will benefit several South Korean companies.

Indeed, the ongoing Kospi Index rally is being led by companies like Samsung, SK Hynix, and SK Square, which jumped by 5.3%, 6.80%, and 7%, respectively. Their market caps jumped to $1.32 trillion, $963 billion, and $116 billion, respectively. SK Square derives most of its value from its ownership of SK Hynix.

Looking forward, the next key catalyst for the Kospi Composite and other indices will be the upcoming Federal Reserve interest rate decision on Wednesday. Analysts expect the bank to leave interest rates unchanged between 3.5% and 3.75% and provide hints on what to expect.

Kospi Index technical analysis

Kospi Composite Index | Source: TradingView

The daily chart reveals that the Kospi Composite Index has done well in the past few months. Its rally has made it one of the best-performing indices globally.

The index has remained above the ascending trendline that connects the lowest swings since May 20th. It has also jumped above the 50-day and 100-day Exponential Moving Averages (EMA).

At the same time, the Relative Strength Index (RSI) has jumped above the neutral point of 50 and is pointing upwards. Therefore, the path of the least resistance for the index is upwards, with the initial target being at 8,925, its all-time high. A move above that level will point to further gains ahead.