South Korea's Kospi swings from bear to bull-market territory in just over a month on AI trade

South Korean stocks rallied Thursday, lifting the benchmark Kospi into a technical bull market as a global revival in the AI trade fuels a sharp recovery after last month's historic sell-off.

The Kospi jumped over 4% in early trade, taking its rebound from its July 30 low to roughly 23%, data from LSEG showed.

Index heavyweights Samsung Electronics and SK Hynix led the gains, with both chip giants rising over 4% and 7%, respectively.

Investor appetite for technology hardware stocks is returning as the latest earnings from global tech giants point to continued heavy spending on artificial intelligence.

The rebound in South Korean stocks could have further to run as strength returns to the country's heavyweight memory-chip makers, according to Fundstrat Global Advisors.

Mark Newton, the firm's head of technical strategy, said the iShares MSCI South Korea ETF has broken above a key technical level on the back of gains in Samsung Electronics and SK Hynix, improving the near-term outlook for Korean equities. The ETF's latest move confirmed a reversal pattern that Newton said "looks attractive technically for further near-term gains."

The bigger signal may be coming from memory stocks themselves. After being among the hardest hit during the recent technology sell-off, memory shares are beginning to outperform the broader tech sector for the first time since June, Fundstrat said.

Newton described that as "a good sign in the short run for Memory within Technology," adding that the group appears to be one of the last major corners of tech to begin turning higher.

That matters for South Korea given the outsized influence of Samsung and SK Hynix on the country's equity market. Fundstrat said the combination of South Korea's rebound and the recovery in memory chips is broadening a rotation back into technology, even as some major U.S. tech names have struggled.

Newton remains bullish on the market in the near term, although he cautioned that the rally could lose momentum later this month if U.S. Treasury yields and the dollar begin climbing again. For now, however, he said South Korea and memory stocks "look to be the right vehicles for near-term risk-on exposure."

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