KOSPI extended its rally to five consecutive sessions, closing in on the 7,000 mark. With Samsung Electronics and SK Hynix leading the rebound and foreign investors flipping to net buying, concerns are resurfacing about a supply-demand vacuum in KOSDAQ, which had previously shown relative strength.

According to the Korea Exchange on August 16, KOSPI closed at 6,977.94 on August 14, up 2.42% from the previous session. The index briefly surged to 7,010.86 intraday, reclaiming the 7,000 level for the first time since July 24, but failed to hold above it on a closing basis. KOSPI has risen 11.5% from 6,258.77 on August 7 to 6,977.94 on August 14. On a weekly basis, the index soared 11.49%, ranking first among major global indices in returns.

Large-cap semiconductor stocks were at the center of the rebound. Samsung Electronics jumped 18.8% in one week, from 231,000 won on August 7 to 274,500 won on August 14, while SK Hynix climbed 15.7% over the same period, from 1,422,000 won to 1,645,000 won. Both stocks rose for four consecutive sessions starting August 11, driving the index rebound. The KRX Semiconductor Index surged 17.61% this week, while the KRX Information Technology Index gained 17.50%.

The catalyst that revived semiconductor investment sentiment was easing concerns over AI investment. According to Daishin Securities, South Korea’s semiconductor exports during the first 10 days of August totaled $10 billion (approximately 14.1 trillion won), up 155.4% year-over-year, with DRAM export unit prices continuing to rise. AI cloud provider CoreWeave reported second-quarter revenue of $2.58 billion, up 112% year-over-year, and raised its annual capital expenditure plan, further supporting investment sentiment.

The most significant change on the supply-demand front is the return of foreign investors. Foreigners net purchased approximately 6.57 trillion won (approximately $4.7 billion) on the main KOSPI board this week. After net selling roughly 1.49 trillion won (approximately $1.1 billion) on August 10, they flipped to net buying for four consecutive sessions starting August 11, purchasing more than 3 trillion won (approximately $2.1 billion) on August 14 alone. Foreign investors’ cumulative August net purchases turned positive at 661.8 billion won (approximately $468.7 million) as of August 14.

Foreign buying was concentrated in large-cap semiconductor names. SK Hynix (2.45 trillion won) and Samsung Electronics (2.29 trillion won) ranked first and second in net purchases, followed by SK Square (226.8 billion won), Celltrion (153.9 billion won), and LG Electronics (141.1 billion won). Institutional investors also moved in the same direction, with Samsung Electronics (1.41 trillion won) and SK Hynix (203.3 billion won) as their top picks. Meanwhile, retail investors spread their buying across individual stocks such as Korea Electric Power Corporation (158.4 billion won), Jeju Semiconductor (81 billion won), and Alteogen (64.7 billion won), taking profits along the way.

KOSDAQ Relative Strength Fades… Supply-Demand Vacuum Concerns

While KOSPI rebounded, KOSDAQ’s relative strength has weakened. KOSDAQ rose 10.98% in the first week of August, ranking first among major global indices, but gained only 8.24% in the second week, ceding the top spot to KOSPI. The index is still up 20.13% for the month, maintaining the No. 1 position among major indices, but the recent concentration of buying in Samsung Electronics and SK Hynix has slowed KOSDAQ’s upward momentum.

Supply-demand concerns are more pronounced. Foreign investors net sold over 1 trillion won on KOSDAQ in the first week, followed by an additional 618.7 billion won (approximately $438.2 million) in net selling in the second week, extending their selling streak to two consecutive weeks. Institutional investors also net sold 40.3 billion won (approximately $28.5 million) on KOSDAQ in the second week. Only retail investors provided support, net purchasing 646 billion won (approximately $457.5 million).

Kang Jin-hyuk, an analyst at Shinhan Investment Securities, said, “KOSDAQ is undergoing a time-based correction in the mid-800 point range, waiting for additional momentum.” A key potential catalyst for KOSDAQ’s next leg up is the introduction of a promotion-relegation system for select quality companies being pursued by South Korea’s financial authorities and the Korea Exchange. Industry sources indicate that discussions are ongoing regarding how many stocks to include in the top-tier designation, tentatively named “KOSDAQ Select.” If the number of constituents is too small, funds could concentrate in a handful of stocks, increasing volatility. However, to attract institutional capital, the selection criteria would need to be stricter than the existing KOSDAQ 150.

U.S. Consumer Slowdown Weighs on Semiconductor Stocks… Next Week a Test

The first test for South Korea’s stock market next week is whether KOSPI can hold above the 7,000 level. Given the index’s uninterrupted five-day rally, short-term profit-taking pressure cannot be ignored. On August 14, KOSPI rose to 7,010.86 intraday but failed to hold the 7,000 level, closing at 6,977.94.

Signals of a U.S. economic slowdown are also a headwind. On August 14, the Dow Jones Industrial Average fell 0.20%, the S&P 500 slipped 0.17%, and the Nasdaq Composite declined 0.28%. U.S. July retail sales fell 0.6% month-over-month, significantly missing market expectations of a 0.1% increase, while the University of Michigan’s preliminary August consumer sentiment index dropped 7.6% from the previous month to 51.0. This triggered profit-taking in AI and semiconductor-related technology stocks, with Broadcom (-5.94%), Applied Materials (-5.12%), and Intel (-1.97%) all declining.

However, market analysts note that this correction does not undermine the AI industry’s earnings outlook itself. The U.S. consumer slowdown was the direct trigger for the stock pullback, and there have been no signals of sharply deteriorating earnings or data center investment plans among AI-related companies. Micron closed up 2.3%, while SK Hynix ADRs gained 0.42%.

Lee Jae-won, an analyst at Yuanta Securities, said, “Ultimately, for KOSPI’s rebound to extend, a sustained return of foreign net buying is crucial,” adding that “easing rate pressure from stabilizing inflation and the decline in the KOSPI volatility index (VKOSPI) create a favorable environment for foreign investors to return.” VKOSPI closed at 55.31, plunging 20.28 points (26.83%) from the previous week, as the fear sentiment that had spiked to 93.27 intraday on July 29 has significantly subsided.

Lee Kyung-min, an analyst at Daishin Securities, said, “As the supply-demand concentration in semiconductors eases and sector rotation continues, the upward trend is expected to persist,” adding, “In the short term, whether KOSPI can establish a foothold in the 6,500-6,800 range is key. If successful, it could open the possibility of recovering to the 8,500 level, which corresponds to a 12-month forward price-to-earnings ratio of 7 times.”

Next week’s calendar includes the release of the U.S. Federal Open Market Committee (FOMC) minutes on August 19, China’s loan prime rate (LPR) on August 20, and South Korea’s producer price index (PPI) on August 21. Geopolitical tensions surrounding the U.S. and Iran, as well as international oil price movements, remain wild cards. Brent crude for October delivery closed up 1.67% at $88.52 per barrel, while West Texas Intermediate (WTI) for September delivery rose 1.42% to $82.40 per barrel. Ultimately, the direction of next week’s market hinges on whether foreign investors continue buying large-cap semiconductor stocks at the 7,000 threshold and how broadly the warmth originating from semiconductors spreads to other sectors.