The KOSPI index surged 4% on Thursday, extending gains for a third consecutive session, breaking through 7,000 points to 7,081.21 as tech shares continued their rally fueled by Alphabet's strong earnings and chip sector rebound. According to Reuters, the index had failed to hold the same level a day earlier, closing 0.74% higher at 6,797.70 after paring a 5% intraday surge. The latest advance puts the threshold to a fresh test, with the Wednesday rebound demonstrating the market's responsiveness to technical support levels. From the current level, Citi's 10,000 target implies a more than 50% gain, and it sits nearly 10% above the previous closing record. The recent recovery has provided significant relief to investors who had been concerned about the sharp decline in recent sessions.
South Korea's GDP expanded 0.6% in the April-June quarter, beating forecasts and providing a significant boost to market sentiment. As reported by The Economic Times, this growth, while slower than the 1.8% growth in the first quarter, beat the Reuters poll estimate of 0.4% and continued to benefit from strong global demand for semiconductors. On a year-on-year basis, South Korea's economy expanded 3.7% in the second quarter, beating the Reuters poll estimate of 3.5%. The economy's resilience despite tighter monetary policy reinforces optimism around the country's technology sector. Exports increased 1.4% from the previous quarter, led by shipments of semiconductors, machinery and equipment, while private consumption rose 0.4%. However, construction investment declined 0.2%, reflecting continued weakness in the domestic property sector. According to Reuters, Bank of Korea officials said the economy would still be able to achieve around 3% annual growth this year if quarterly growth remains above a modest threshold during the second half.
US tech firms are increasingly using AI to challenge incumbent platforms across search and e-commerce, reinforcing the AI disruption trade, according to Reuters citing Gary Tan, portfolio manager at Allspring Global Investments. Alphabet reported second quarter revenue of $119.8 billion, up 24% year over year, with Google Cloud growing 82%, with the company also raising its capital spending forecast to reinforce demand for artificial intelligence infrastructure. The bigger takeaway is that AI is rapidly moving from infrastructure to disruption, with hyperscalers increasingly using AI to challenge incumbent platforms across various sectors. This development has provided additional momentum to the chip sector rally, as semiconductor companies benefit from increased AI-related demand and infrastructure spending.
Technology stocks led Thursday's rally after strong earnings from Alphabet and Tesla reinforced expectations that AI infrastructure spending will remain robust, boosting demand for advanced chips and memory products. According to Reuters, Samsung Electronics climbed as much as 4.8%, while SK Hynix gained up to 6.5%, with the semiconductor heavyweights extending gains in an Asian semiconductor index for a third straight session. Battery maker LG Energy Solution rose nearly 4%, Hyundai Motor advanced 3.6%, Kia Corp added 1.9%, POSCO Holdings gained 4%, and Samsung BioLogics rose 2.1%. The Korean won strengthened to 1,467.6 per US dollar, its strongest level since mid-May, reflecting improved market confidence. Asian equities moved higher as investors continued to bet on semiconductor manufacturers benefiting from billions of dollars being invested globally in artificial intelligence infrastructure, with MSCI's Asia Pacific equity index rising 0.8%.
Rate hike expectations remain intact following the stronger-than-expected economic performance, with persistent inflation reinforcing expectations that the Bank of Korea will continue tightening monetary policy. According to Reuters, a Reuters poll indicated the central bank is likely to deliver at least one more rate hike this year, taking the benchmark policy rate to 3.00%, followed by another increase to 3.25% in the first quarter of 2027. The central bank had raised its benchmark seven-day repurchase rate by 25 basis points to 2.75% earlier this month, marking its first increase since January 2023. The stronger-than-expected economic performance, coupled with persistent inflation, has reinforced expectations that the Bank of Korea will continue tightening monetary policy. Reuters quoted analysts as saying the balance of risks now favours another rate increase as early as next month if inflationary pressures become more broad-based.
