South Korea’s Kospi Index rose by over 4% on Tuesday, mirroring the resurgence of the US equities market. It rose to KRW 7,814, a few points above the Monday’s low of KRW 7,435 as technology stocks jumped and crude oil prices retreated.
South Korean stocks jump as technology companies rose
The Kospi Index suffered a big crash on Monday as investors dumped technology companies like Samsung and SK Hynix. This retreat coincided with the sell-off in US tech companies like Broadcom, Intel, and Nvidia.
South Korean stocks jumped as investors reacted to the resurgence in Wall Street, where semiconductor companies had their best day of the year. The closely-watched VanEck Semiconductor ETF (SMH) jumped by 5%, while the iShares Semiconductor ETF (SOXX) rose by 6%.
The rally happened after Jensen Huang, Nvidia’s CEO, made the case for investors buying the dip in tech stocks. He said this during a visit to South Korea, where he announced that its new Vera chips will use SK Hynix’s memory chips.
Therefore, the Kospi Index is rising as investors follow the performance of their Wall Street peers. They are also doing well after OpenAI, the ChatGPT creator, made its filings for an IPO that will value it at over $1 trillion. Perplexity has also hinted that it will go public soon. It was recently valued at between $20 billion and $25 billion.
Still, there are concerns that South Korean tech stocks are highly overbought. Samsung Electronics’ Relative Strength Index (RSI) has moved to the overbought level of 76. It also remains much higher than the 50-day and 100-day Exponential Moving Averages (EMA).
Similarly, the SK Hynix stock’s RSI has jumped to the overbought zone of 76. In most cases, highly overbought stocks often retreat as investors book profits over time.
Crude oil prices retreat
The Kospi Index also rebounded as crude oil prices retreated for four consecutive days to $93.41, down by 22% from its highest point this year. It retreated after the US urged Iran and Israel to “stop shooting” after hours of attacks. Iran launched its first attack against Israel in two months.
Falling crude oil prices are bullish for South Korea, a country that imports most of its oil from its Gulf countries. Stil, as we warned earlier today, there is a risk that oil priceswill rebound as global inventories fell.
The Kospi Index also jumped after macro data showed that the economy was doing well. Data showed that the economy expanded by 1.7% in the first quarter after contracting by 0.1% in the previous one. It expanded by 3.6% YoY after growing by 1.6%.
Kospi Index technical analysis
Kospi Composite Index chart | Source: TradingView
The daily chart shows that the Kospi Composite Index retreated from a high of KRW 8,935 to a low of KRW 7,435 on Monday. It then rebounded to KRW 7,880.
A closer look at the index shows that it has remained above all moving averages. If it closes at this level today, it means that it has formed a harami candlestick pattern, a common bullish reversal pattern.
Therefore, the index will likely rebound in the near term. If this happens, the next key target to watch will be at KRW 8,500. In the long-term, however, the Kospi Index will likely retreat as investors book profits. Indeed, recent data shows that foreign investors have started fleeing South Korean stocks.
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