HONG KONG: South Korean stocks soared a record 17.9 per cent on Friday (Jul 31) as Asian tech firms performed a blistering recovery from an extended sell-off, with beaten-down chip giant SK Hynix rocketing almost a third as the AI boom roared back.
After four weeks of blood-letting fuelled by worries over the vast sums being invested in artificial intelligence, traders raced to pick up bargains following a series of strong earnings.
Seoul’s KOSPI had been at the forefront of the sell-off after hitting a record high a month ago, with chipmakers SK Hynix and Samsung the poster children of the rout, losing around half their value in the panic.
However, the voracious buying sentiment that had characterised markets for much of the past two years was back as bargain hunters returned and traders took heart in a series of announcements.
US giants Microsoft and Amazon unveiled healthy earnings this week that saw their shares storm higher on Wall Street, helping the Nasdaq pile on almost 3 per cent.
Analysts note that while tech firms have suffered heavy selling in recent weeks, that was focused on concerns about when the huge sums invested in AI would see returns rather than fundamental problems in the sector.
The KOSPI’s eye-watering rally was helped by news that South Korea’s government planned to pump almost US$14 billion into its sovereign wealth fund for AI investments and data centres.
Officials had earlier pledged to introduce measures to curb retail traders’ access to leveraged exchange-traded funds (ETFs), including limits on individuals’ investment in them, which had been partly blamed for the recent panic-selling.
Analysts also pointed to a report saying hedge fund Citadel bought a large part of the AI stocks held by hedge fund Situational Awareness, which had investments in several Asia-based firms including SK Hynix and had been offloading.
SK Hynix surged 30 per cent – wiping out its losses from the previous two days – helped by confirmation that Chey Tae-won, chair of parent company SK Group, had bought around US$3 million worth of shares, his first purchases in a personal capacity.
The move was seen as a major vote of confidence in the company after the rout.
Chey had dismissed the swings as a market adjustment earlier this month, saying investors should take a long-term view, adding that “memory chips will always be needed, so their value will eventually rise over time”.
Samsung Electronics spiked almost 27 per cent.
Ryu Hyung-keun, of Daishin Securities, told AFP investors had become “increasingly sceptical about how much further memory chip prices could rise”.
But Chey’s purchase of company shares had been interpreted by investors as “a positive signal”, he said.