South Korea's Kospi rose 2.6% on Wednesday to close at 5,375.36, adding 136.23 points to a 4.39% jump the day before, as foreign investors bought a net 655.26 billion won ($490 million) of shares and the won strengthened against the dollar, according to Korea JoongAng Daily, citing Yonhap.

The two-day move matters for investors across Asia because Seoul has become one of the region's purest trades on artificial intelligence hardware. Samsung Electronics and SK hynix are the market's two largest companies, and foreign funds had been heavy sellers of Korean shares before this week. A second straight day of net foreign buying, backed by a firmer currency, is the first sign in some time that the outflow is pausing.

The gain came despite a soft start. The Kospi opened 0.56% lower after Wall Street fell overnight, with the Dow Jones Industrial Average down 0.3% and the Nasdaq Composite down 0.74%. Hotter-than-expected U.S. consumer price data for October had revived concern that the Federal Reserve could tighten policy more aggressively. By 9:15 a.m. the index had turned positive, and it went on to touch an intraday high of 5,377.99, finishing near the top of its range.

Samsung Electronics, SK hynix and defense stocks lead

Chipmakers did most of the work. SK hynix rose 5.36% to about 1.28 million won and Samsung Electronics gained 3.57% to 206,000 won, Korea JoongAng Daily reported. On Tuesday the pair had climbed 6.69% and 4.74%, respectively, after a sharp rally in U.S. semiconductor shares.

Defense names posted some of the largest gains. Korea Aerospace Industries jumped 7.71% to 109,000 won and LIG Defense & Aerospace rose 9.73% to 372,000 won.

Hyundai Motor Securities attributed the advance to bargain hunting in AI-related stocks and to lower oil prices, the newspaper said. Crude had fallen after U.S. President Donald Trump made comments suggesting military action against Iran was less likely, a theme that also drove Tuesday's rally in airline shares. Some investors were also looking ahead to Anthropic's planned initial public offering next week, according to the report.

The biggest loser among large companies was Hanjin KAL, the holding company of Korean Air, which fell 14.64% to 204,000 won. The report did not give a reason for the drop. Hyundai Motor slipped 0.91% to 272,500 won.

Breadth was solid, with 573 gainers against 295 decliners. Turnover was relatively light at 219 million shares worth 16.3 trillion won, slightly above Tuesday's 16.2 trillion won.

Foreign investors buy, individuals and institutions sell

The flow data showed a hand-off. Foreigners were net buyers of 655.26 billion won, almost double their 365.9 billion won of purchases on Tuesday. Institutions turned net sellers of 481.67 billion won after buying 489 billion won the previous day, and individuals sold a net 715.69 billion won, extending Tuesday's 1.3 trillion won of retail selling.

Retail selling has been closely watched in Seoul because of how much borrowed money sits in the market. On Nov. 6 the Ministry of Finance and Economy, after a market review meeting chaired by Deputy Prime Minister Lee Hyoung Il, said it would waive the 140% collateral ratio requirement on securities firms' margin loans for three months from Nov. 9, to limit forced selling. Officials at the meeting, which included the heads of the Financial Services Commission and Financial Supervisory Service and a Bank of Korea deputy governor, also agreed to prepare further stabilization steps if volatility rose. Our earlier report covers what the margin loan waiver means for Kospi investors.

The ministry used the same statement to argue that the economy's fundamentals remain sound, pointing to expected growth in the mid-3% range this year, exports of $1 trillion and corporate operating profits above 900 trillion won.

Won strengthens to 1,333.6 per dollar

The currency moved with the stock market. The won rose 3.9 won from the previous session to 1,333.6 per dollar as of 3:30 p.m. local time, Korea JoongAng Daily reported, from 1,337.5 on Tuesday. Earlier in the day it had traded at 1,339.75.

A firmer won tends to reinforce foreign buying in Seoul, since it raises the dollar value of Korean holdings, and the currency's direction has been closely tied to how long overseas funds stay in Korean equities. The won's recent swings are covered in our report on foreign selling and the current account.

The next test is whether foreign buying extends to a third session on Thursday, and whether the won can hold below 1,340 per dollar as markets digest the U.S. inflation figures.