Kospi eyes rebound after steep sell-off as US bond yields ease, chip stocks rally

With US Treasury yields pulling back from a recent surge and semiconductor stocks rallying overnight, attention is turning to whether the Kospi can recoup Wednesday's sharp losses when trading opens Thursday.

The Kospi tumbled 273.08 points, or 3.99 percent, to close at 6,562.72 on Wednesday, reversing course after three consecutive sessions of gains. The index opened down 3.08 percent at 6,625.47 and briefly trimmed its losses to as high as 6,694.57 before sliding again into the close.

On the main Kospi market, foreign and institutional investors sold a net 1.93 trillion won ($1.41 billion) and 2.04 trillion won, respectively, extending their selling streak to four consecutive sessions. Retail investors countered with net purchases of 2.3 trillion won, while other corporate entities bought a net 1.65 trillion won.

The "other corporates" category has now posted net buying for 11 straight sessions through Wednesday, driven by Samsung Electronics' share buyback for employee stock compensation and SK hynix's repurchase of shares for cancellation.

That sustained buying had helped the Kospi reverse early losses and finish higher on Monday and Wednesday in a pattern of weak openings followed by stronger closes. On Wednesday, however, heavy selling by foreign and institutional investors overwhelmed the support, preventing any recovery. Large-cap chip stocks led the decline, with Samsung Electronics falling 4.02 percent and SK hynix dropping 4.73 percent.

The Kosdaq also fell, losing 17.27 points, or 2.10 percent, to close at 803.98 — its third consecutive session of losses.

Overnight in New York, investor sentiment partially recovered as US Treasury yields paused their recent surge.

All three major indexes, which had fallen for three straight sessions, rebounded in unison. The Dow Jones Industrial Average rose 0.56 percent, while the S&P 500 and the tech-heavy Nasdaq Composite gained 0.46 percent and 0.45 percent, respectively.

The US 10-year Treasury yield climbed as high as 4.821 percent during trading — its highest level since November 2023 — before gradually giving back its gains to trade at 4.793 percent as of 3 p.m. local time, down 0.2 basis points from the previous session. (One basis point equals 0.01 percentage point.)

The 30-year Treasury yield was unchanged at 5.266 percent, while the 2-year yield fell 0.8 basis points to 4.383 percent.

Bargain hunters moved into semiconductor-related stocks. Dell led the charge, surging 15.81 percent after raising its annual sales and profit outlook on the back of soaring AI server demand.

Nvidia rose 3.21 percent, Micron gained 2.43 percent and Qualcomm advanced 2.01 percent. SK hynix's American depositary receipt climbed 2.61 percent. The Philadelphia Semiconductor Index closed up 0.45 percent.

Oil prices extended their rally for a third straight session amid US-Iran hostilities. November-delivery Brent crude futures rose 1.04 percent, while October-delivery West Texas Intermediate futures gained 0.88 percent.

"US stocks opened near flat, but as moves in crude oil and the 10-year Treasury yield became more contained, the indexes extended gains on the back of strength in Dell and Nvidia," said Seo Sang-young, a managing director at Mirae Asset Securities. "Markets that had been unsettled by the recent rise in bond yields found their footing once the rate moves stabilized."

The MSCI Korea ETF, a gauge of foreign investor sentiment toward Korean equities, rose 1.74 percent, and the KOSPI 200 overnight futures index gained 1.40 percent.

The question now is whether the domestic market can shake off Wednesday's losses and regain upward momentum when trading resumes Thursday.

"The domestic market is expected to rebound today, as technical buying on oversold conditions combines with the easing of the US 10-year yield surge and the earnings surprise from Broadcom," said Han Ji-young, a researcher at Kiwoom Securities.