Today, the Korean stock market welcomed a strong rebound. As of the time of publication, the KOSPI index has risen over 5%, currently at 6848.81 points. Among them, SK Hynix has risen over 12% and Samsung Electronics has risen over 8%. During the trading session, the Korean exchange activated the Sidecar mechanism, suspending programmatic buying on KOSPI.

The Southbound doubled up on Samsung Electronics has risen over 8%, and Southbound Dongying SK Hynix daily leverage maximum (2x) rose nearly 4%.

Multiple favorable factors resonate

The direct catalyst for this significant surge comes from changes in U.S. bond market policy.

On Wednesday, U.S. Treasury Secretary Janet Yellen announced that the size of a one-time repurchase of long-term treasury bonds maturing in 10 to 30 years would at least double from $2 billion to $4 billion, in an effort to curb the decades-high treasury yields. Following the announcement, as of the time of publication, the 30-year treasury yield fell to 5.18%, and the three major U.S. stock indices slightly rose overnight.

Analysts believe that the signal of “intervention when necessary” released by this move is more significant than the repurchase itself. Matt Maley, chief market strategist at Miller Tabak, stated that this action “could boost the prices of risk assets in the short term.”

The sentiment towards risk assets has warmed, leading to a strong technical rebound in the Korean stock market. According to data from the Korean Exchange as of 10 AM, foreign investors net bought 682.341 billion won, and institutional investors net bought 750.326 billion won; individuals net sold 1.445809 trillion won.

At the individual stock level, favorable support has also emerged.

On August 19, SK Hynix announced that it would repurchase and cancel approximately 24.07 million treasury shares over the next three months, totaling 40 trillion won (approximately $28.6 billion), accounting for 3.3% of the issued shares. The company also raised its shareholder return target for 2025 to 2027 to over 50% of cumulative free cash flow, with more dividend details to be disclosed along with its third-quarter financial report.

SK Hynix stated that this action stems from the company’s belief that the current stock price does not adequately reflect its value, as of the end of the second quarter, the company had a net cash scale of approximately 69 trillion won, sufficient to support large-scale returns.

Park Jun-young, analyst at Hanwha Investment & Securities, said that the 40 trillion won repurchase is unlikely to be a one-time shareholder return. “We expect this move to lead to continuous reductions in the number of shares, promoting increases in per-share value.”

It is noteworthy that another semiconductor giant, Samsung Electronics, is also experiencing frequent favorable news. Due to surging demand, reports indicate that Samsung has raised the prices for some advanced chip foundry services by up to 15%, with the price increase logic extending from storage to foundry services. Samsung also stated that it will “soon” disclose the details of its shareholder return policy for this year and beyond. It is reported that the company plans to hold a board meeting in August to determine and announce a shareholder return policy on the scale of 100 trillion won (approximately $71.9 billion), which would be the largest in the history of Korean companies.

Upgrading Korean stocks to overweight

Since the beginning of this year, Korean stocks have gone through a rare roller coaster market. Driven by the AI storage supercycle and the “value enhancement plan” reform, the KOSPI index briefly reached a historical high of 9100 points in June, with a half-year increase of over 100%. However, since the end of June, the market rapidly retreated under the pressures of AI capital expenditure concerns and profit-taking, with a drop of over 30% from the high point at the end of July. Nevertheless, the KOSPI has still increased by over 57% year-to-date, remaining one of the best-performing major indices globally.

Herald van der Linde, head of Asia-Pacific equity strategy at HSBC, stated that the previous correction effectively cleared a lot of excess leverage. “The volatility of the Korean stock market remains high but has retreated from its peak.” The bank has upgraded its rating on the Korean stock market from neutral to overweight, believing that as long as domestic demand remains strong, foreign capital's mechanical selling should not become a major resistance.

In addition, driven by strong business performance due to artificial intelligence, S&P elevated the rating of SK Hynix in Korea to “A-”.

SK Group Chairman Choi Tae-won remarked that next year will witness the “most severe storage shortage,” with new capacity unable to meet the pace of demand explosion. TrendForce estimates that the global HBM market is expected to grow 120% year-on-year by 2026, with a supply gap of up to 15% to 20%. Bank of America’s channel survey also indicated that the wave of storage price increases is far from over, with NAND spot prices rising as much as 10% in a single week, and prices for 1Tb wafers soaring over 500% year-on-year, while DRAM spot prices have risen for 18 consecutive weeks.

In this regard, Paul Meeks, head of technology research at Freedom Capital Markets, believes that the storage demand driven by AI and long-term customer agreements still support the industry's fundamentals, but the market's concerns over high valuations and the peak of the storage chip price cycle have intensified short-term fluctuations.

Market participants remind that after the rapid increase, there may be short-term profit-taking pressure, and the realization of third-quarter earnings, the path of U.S. interest rates, and external disruptions may exacerbate market volatility.

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