KOSPI Soars 4.5% on Foreign Short Covering; Buying Concentrates in Semiconductor and Cosmetics Stocks

Director Park Hyeon-sang noted that there was no major short-covering movement in the US yesterday, making the rise in Korean stocks noteworthy.

Short covering means repurchasing shares to close out short-sale positions, and it tends to push prices higher.

Director Park Hyeon-sang pointed out that Korean stocks have recovered relatively slowly compared with Taiwanese and Japanese markets. Although Taiwan fell along with Korea, it has recovered to near record highs, and Japan's Nikkei has also recovered substantially.

By contrast, the KOSPI remains well below its previous peak, which can be read as leaving room for further gains.

This level is presented as the technical rebound point after a 50% decline.

To match Taiwan's market, which has many semiconductor companies, Korea would need to reach above 8,000 points, and merely matching Japan's level would still require about 7,500 points. This suggests the KOSPI has not yet recovered sufficiently and still has room to rise.

With the KOSPI up about 4.5%, he added that this direction is unlikely to reverse easily, and that since foreign investors continue large-scale buying, they appear to be judging tonight's CPI favorably.

Tomorrow's options expiry is expected to bring a brief pause once the market's direction has clearly formed, as it did today. After the KOSPI rose modestly yesterday and then jumped 200 to 300 points today, the upward direction has solidified, so the expiry day may see a breather rather than sharp swings.

Because the market moved in advance and established its direction before expiry, the expiry itself may have limited impact.

Current foreign buying appears aimed more at index plays than at simple stock purchases. Director Park Hyeon-sang cited the fact that only about 380 stocks on the exchange are rising, and despite the 290-point gain, the movement is concentrated in specific stocks rather than broad gains, which he presented as evidence of index manipulation.

He explained that large-cap stocks such as Samsung Electronics and SK Hynix, which he called the 'Jeonjeon-nix', are being moved to adjust positions in a 'pull and release' fashion linked to derivatives.

Previously, market strength was weak, driven mainly by individual investors and some institutional traders, but the large inflow of foreign buying has strengthened the market as a whole.

The pattern of the KOSPI falling and then rising again, followed by the KOSDAQ making the same move, shows the overall market flow is improving. This means foreign capital inflows are spilling over into the KOSDAQ, not staying only in large caps.

As investors re-enter, they will start weighing which stocks to buy and which have risen or fallen, and Director Park Hyeon-sang explained that this will activate market participation. This could translate into higher market liquidity and additional upward momentum.

An article reported that system-trading investors are preparing to increase their equity exposure again after a large-scale deleveraging at Citadel Securities. This means institutions that had cut risk assets may likely return to the stock market through 'relevering.'

The article also said investors are increasingly willing to pay for the possibility of upside, suggesting that overall market sentiment is improving.

This move appears linked to a financial support program by Nvidia aimed at drawing Wall Street capital to build a $500 million AI ecosystem.

By shifting this risk to financial institutions and trading hourly rental prices as futures rather than the GPUs themselves, the risk that arose from the lack of price unification can be traded through a linearized index and thereby resolved. This is expected to help strengthen the financial soundness of the AI ecosystem.

This is a risk that new financial products always carry, and it sends the message that overheating in the market should be watched closely.

Director Park Hyeon-sang sees this change as positive for the hardware sector, especially the memory semiconductor industry.

Memory companies, including the 'Jeonjeon-nix' (Samsung Electronics and SK Hynix), have struggled with capacity expansion issues, but the analysis holds that these new financial techniques could partly resolve those problems and help improve the situation.

Director Park Hyeon-sang warned against investing in small construction stocks with low market capitalization. Stocks in the 50 billion or 80 billion won range have thin trading volume, creating a serious liquidity risk: if market conditions worsen, investors may be unable to sell even when they want to.

He stressed that many investors are increasingly being drawn to such small stocks, and warned that they should never invest in them.

In the middle of this surge, Director Park Hyeon-sang urged investors not to get too excited and to stay wary. That is because a move tied to tomorrow's options expiry cannot be ruled out.

He noted that when the market recovers from a rough patch, investors tend to get excited and buy at high prices, and stressed that it is more important now to look for individual stocks that have not yet risen or are holding firm, and to stick to one's investment principles.

Cosmetics stocks have drawn attention with strong supply and demand and a sharp rally. Director Park Hyeon-sang noted that Cosmecca Korea rose 13% yesterday and again today, riding the trend.

Cosmetics-related stocks that had not moved before, such as Korea Kolmar, also jumped, and distribution-related Silicon2 likewise moved sharply.

For the market to keep rising, a clear leading sector is essential, and cosmetics stocks are currently showing very strong movement.

Silicon2 is seeing a 'twin-engine' buying pattern from foreign and institutional investors, and Korea Kolmar hit a new high on strong institutional buying, so the supply-and-demand picture is very positive. Director Park Hyeon-sang suggested that this strength in cosmetics could become a new driver of market gains.

Large semiconductor stocks such as Samsung Electronics and SK Hynix showed the strongest gains yesterday and today. Director Park Hyeon-sang cited their weakness through Monday as the biggest reason for this rally. While the KOSDAQ, shipbuilding, and defense sectors all rose, only the 'Jeonjeon-nix' stayed flat.

This is read as the semiconductor stocks' turn coming late in a healthy rotation across the market. Large semiconductor stocks that had been left out are rising belatedly and leading the index rebound.

Director Park Hyeon-sang said this investor did not buy large caps such as Samsung Electronics or SK Hynix, but instead accumulated the cheapest-looking, most solid cosmetics stocks in substantial size.

It was cited as an example showing that patience and investing against the market's flow can lead to major success.

Caution is needed toward stocks like Alteogen, which served as a 'hero' in the recent KOSDAQ strength. Alteogen played a large role when the KOSDAQ index rose 7%, but it is now falling 3%.

Director Park Hyeon-sang warned that such stocks can rise sharply when the market rises but can fall even harder when it declines, and cautioned that investors should be careful.